As mortgage rates rose to their highest level in three years last week, experts were not surprised to see mortgage applications continue their downward trend as well. The latest data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey show the Market Composite Index, a measure of mortgage loan application volume, decreased 6.8% from one week earlier.
On an unadjusted basis, the Index decreased 6% compared with the previous week. The Refinance Index decreased 15% from the previous week and was 60% lower than the same week one year ago. The seasonally adjusted Purchase Index increased 1% from one week earlier. The unadjusted Purchase Index increased 1% compared with the previous week and was 10% lower than the same week one year ago.
Key findings:
- Refinance share of mortgage activity decreased to 40.6% from 44.8% the previous week.
- Adjustable-rate mortgage (ARM) share of activity increased to 6.6% of total applications.
- FHA share of total applications increased to 9.3% from 8.8% the week prior.
- The VA share of total applications decreased to 9.5% from 9.8% the week prior.
- USDA share of total applications increased to 0.5% from 0.4% the week prior.
- Average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 4.80% from 4.50%
- Average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $647,200) increased to 4.40% from 4.1%
- Average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 4.66% from 4.40%
- Average contract interest rate for 15-year fixed-rate mortgages increased to 4.01% from 3.76%
- Average contract interest rate for 5/1 ARMs increased to 3.70% from 3.3%
The takeaway:
“Mortgage rates jumped to their highest level in more than three years last week, as investors continue to price in the impact of a more restrictive monetary policy from the Federal Reserve. Not surprisingly, refinance application volume declined further, as fewer borrowers have an incentive to apply at rates that are significantly higher than a year ago. Refinance application volume is now 60 percent below last year’s levels, in line with MBA’s forecast for 2022,” said Mike Fratantoni, MBA senior vice president and chief economist. “Even with the ongoing climb in rates, purchase application volumes were little changed last week. This is particularly auspicious, as we are now in the beginning of the spring homebuying season, and those shopping for homes are struggling with not only higher and more volatile mortgage rates, but also an ongoing shortage of homes on the market. Given these hurdles, it appears to be promising news that purchase application volume has not declined, as many potential buyers are likely feeling the squeeze in their purchasing power from the jump in rates.”
