Last week’s increase in mortgage applications was short-lived following the Fed’s fourth interest rate hike last week, causing the volume of applications to give back most of its gains after what had been a six-week decline, the Mortgage Bankers Association (MBA) said Thursday.
Mortgage applications decreased 3.7% from one week earlier and the pace of refinancing is running at a 22-year low, according to MBA’s Weekly Mortgage Applications Survey for the week ending September 23, 2022.
More on this week’s key findings:
- The Market Composite Index, a measure of mortgage loan application volume, decreased 3.7% on a seasonally adjusted basis from one week earlier.
- On an unadjusted basis, the Index decreased 4% compared with the previous week.
- The Refinance Index decreased 11% from the previous week and was 84% lower than the same week one year ago.
- The seasonally adjusted Purchase Index decreased 0.4% from one week earlier.
- The unadjusted Purchase Index decreased 1% compared with the previous week and was 29% lower than the same week one year ago.
- The refinance share of mortgage activity decreased to 30.2% of total applications from 32.5% the previous week.
- The adjustable-rate mortgage (ARM) share of activity increased to 10.4% of total applications.
- The FHA share of total applications decreased to 12.5% from 13.3% the week prior.
- The VA share of total applications decreased to 10.7% from 10.9% the week prior.
- The USDA share of total applications remained unchanged at 0.6% from the week prior.
- The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 6.52% from 6.25%, with points increasing to 1.15 from 0.71 (including the origination fee) for 80% loan-to-value ratio (LTV) loans. The effective rate increased from last week.
- The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $647,200) increased to 6.01% from 5.79%, with points increasing to 0.7 from 0.46 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.
- The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 6.17% from 5.85%, with points increasing to 1.31 from 1.15 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.
- The average contract interest rate for 15-year fixed-rate mortgages increased to 5.70% from 5.40%, with points increasing to 1.33 from 1.06 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.
- The average contract interest rate for 5/1 ARMs increased to 5.30% from 5.14%, with points increasing to 1.28 from 0.99 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.
Kan’s take:
“Applications for both purchase and refinances declined last week as mortgage rates continued to increase to multi-year highs following more aggressive policy measures from the Federal Reserve to bring down inflation. Additionally, ongoing uncertainty about the impact of the Fed’s reduction of its MBS and Treasury holdings is adding to the volatility in mortgage rates. The 30-year fixed rate was 6.52%, its highest level since mid-2008. After a brief pause in July, mortgage rates have increased more than a percentage point over the past six weeks,” said Joel Kan, MBA’s associate vice president of Economic and Industry Forecasting. “With rates now more than double what they were a year ago, the pace of refinancing is running at a 22-year low and last week was more than 80% below last year’s level. Similarly, purchase activity was 29% lower than a year ago, with higher rates and economic uncertainty weighing on buyers’ decisions.”
Added Kan, “With the recent jump in rates, the ARM share reached 10% of applications and almost 20% of dollar volume. ARM loans remain a viable option for qualified borrowers in this rising rate environment.”
