The MBA's Market Composite Index, a measure of weekly application volume based on surveys of the trade group's members, climbed up by a seasonally adjusted 2.6% for the period ending May 3. The increase came after it slipped 2.3% the previous week, but on a year-over-year basis, the index still came in 13.5% lower. 

Volumes headed higher, even as the Federal Reserve held its bank lending rate at the same level after its meeting last week and gave no clear sign of when a cut might occur. While the news may have disappointed home lenders, markets still saw favorable-enough signs both within Fed Chair Jerome Powell's post-meeting comments and the government jobs report a few days later to push mortgage rates downward, said Mike Fratantoni, MBA senior vice president and chief economist. 

The contract average for the 30-year conforming fixed rate took an 11 basis point drop among MBA lenders, ending the week at 7.18% compared to 7.29% seven days earlier. Points used to buy down the rate remained at 0.65 for 80% loan-to-value ratio applications. 

Both purchases and refinances finished with greater volumes last week. The seasonally adjusted Purchase Index saw a 1.8% uptick. Compared to the same week a year ago, though, volumes took a 17% drop, as borrowers encounter persistent affordability obstacles beyond interest rates. 

But a more-than-5% weekly surge in Federal Housing Administration-backed applications was an encouraging sign for certain segments of the housing market, Fratantoni said. 

"First-time homebuyers account for roughly half of purchase loans, and the government lending programs are an important source of financing for these home buyers," he noted.

The Refinance Index, meanwhile, climbed up 4.5% from the previous survey, highlighted by a 28.6% jump in Department of Veterans Affairs-sponsored loans. But the latest increase still left refinance volume 5.8% below last year's "already low levels," Fratantoni said.

The quicker pace of growth in refinance applications led them to a larger 30.6% share relative to overall activity. A week earlier, refinances accounted for 30.2%. But adjustable-rate mortgages edged back to a 7.7% portion from the prior survey's 7.8%, which was the high mark for 2023. Contraction occurred even as the ARM Index increased 1.1%

Federally backed lending saw a growing share, though, thanks to mortgages coming through the FHA and VA. FHA-sponsored applications accounted for 12.9% of volume, up from 12.7% a week earlier. VA-guaranteed loans nabbed an 11.7% slice, rising from 11.3%. U.S. Department of Agriculture loans maintained the same 0.4% portion week over week. 

The seasonally adjusted Government Index increased faster than the pace overall, with a 5.2% surge.

Fixed interest rates fell across the board in the MBA survey, with the contract average for 30-year jumbo mortgages tumbling 8 basis points to 7.31% from 7.39% seven days prior. Points were unchanged at 0.46.

The contract 30-year interest rate on FHA-backed applications headed back under the 7% threshold for the first time in three weeks, plunging 17 basis points to 6.92% from 7.09% during the previous survey period. At the same time, points fell to 0.91 from 0.98 for 80% LTV loans.