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During the holiday-shortened week, government-backed mortgages took the lead in driving demand in the housing market. Despite a 5.2% drop in mortgage applications, interest in government-backed loans surged, while demand for standard mortgages declined. The Mortgage Brokers Association reported these findings after adjusting for the Memorial Day holiday.
Mortgage rates rose for the second consecutive week, with the 30-year fixed-rate mortgage climbing to 7.07%, its highest level in a month. Purchase activity decreased by 4% during the holiday week, and refinancing dropped by 7%. However, the share of both Veterans Administration (VA) and Federal Housing Administration (FHA) loans increased during this period.
Mike Fratantoni, senior vice president and chief economist at MBA, noted that government purchase volume decreased at a slower rate, thanks to growth in VA applications. He mentioned that the market heavily relies on first-time homebuyer demand, with many first-time buyers using government lending programs. The shifting dynamics in the housing market are bringing government-backed mortgages to the forefront as a crucial driver of demand.