High Rates Drive Mortgage Applications Down 1.8%, Lowest Purchase Index In A Month

The Mortgage Banker's Association reported today that weekly mortgage applications have dipped 1.8% from the previous week, as high mortgage rates continue to challenge prospective homeowners. The report, which covers over 75% of all U.S. retail residential mortgage applications, presented a grim picture for the week ending July 21, 2023.

"Mortgage rates were essentially flat last week but remained high, with the 30-year fixed staying at 6.87%," MBA’s Deputy Chief Economist Joel Kan, said. "This contributed to a pullback in mortgage applications, driving the purchase index to its lowest level in over a month."

This pullback is partly due to a 10% decrease in Federal Housing Administration (FHA) applications, which pushed the average purchase loan size to a two-month high of $432,700. "Refinance applications remained lackluster, running 30% behind year-ago levels. Many borrowers remain on the sidelines given current rates and persistent affordability challenges,” Kan added.

While the Refinance Index saw a minor increase in activity, rising to 28.7% of total applications from 28.4% the previous week, the adjustable-rate mortgage (ARM) share of activity dropped to 5.9% of total applications.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances remained unchanged at 6.87%, and the rate for jumbo loan balances increased slightly to 6.90% from 6.89%. For 30-year fixed-rate mortgages backed by the FHA, the average contract interest rate increased to 6.80% from 6.77%.

The report, based on data collected weekly since 1990 from mortgage bankers, commercial banks, and thrifts, is a crucial barometer of the nation's housing market.