Slowing Job Market Drives Decrease in Mortgage Borrowing Costs and Increased Homebuying Activity

In the week ending on May 3, the Mortgage Bankers Association (MBA) reported a 2.6% increase in mortgage applications, driven by the first decline in borrowing costs in three weeks. The average 30-year fixed-rate mortgage dropped to 7.18%, marking a decline for the first time in three weeks.

The slowing job market was attributed to this decrease in rates. Wage growth had been at its slowest pace since 2021, leading to a decline in borrowing costs.

Additionally, FHA loan applications also went up by 5%, leading to an overall 2% increase in purchase activity for the week. FHA-backed 30-year fixed-rate mortgages fell to 6.92%, marking their first decline in three weeks. Mike Fratantoni, MBA senior vice president and chief economist, highlighted the importance of government lending programs for first-time homebuyers who account for around half of purchase loans.

Moreover, there was also an increase of 5% in refinance applications as shown by MBA data due to government lending programs providing financing options for homeowners looking to refinance their loans.