Rising Homebuyer Demand Driven by Decline in Borrowing Costs and Government Lending Programs

The first decline in borrowing costs in three weeks led to a 2.6% increase in mortgage applications last week, according to data from the Mortgage Bankers Association (MBA). This was driven by a slowing job market, with wage growth at its slowest pace since 2021. The average 30-year fixed-rate mortgage dropped to 7.18% in the week ending on May 3.

Applications for Federal Housing Administration (FHA) loans also went up by 5%, leading to a 2% increase in purchase activity for the week. FHA-backed 30-year fixed-rate mortgages fell to 6.92%, marking a decline for the first time in three weeks. Mike Fratantoni, MBA senior vice president and chief economist, emphasized the importance of government lending programs for first-time homebuyers, who account for around half of purchase loans.

In addition to the rise in purchase activity, more homeowners applied to refinance their loans, with a 5% increase in refinance applications as shown by the MBA data. Fratantoni highlighted the significance of government lending programs in providing financing options for first-time homebuyers.