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MBA: Higher Rates Deterring Refinance Applications

David Krechevsky
Jan 26, 2022
RESPA Mortgage Application

All mortgage rates in MBA's survey continued to climb, with the 30-year fixed-rate rising for the fifth consecutive week to its highest level since March 2020.

KEY TAKEAWAYS
  • The MBA’s Refinance Index decreased 13% from the previous week, but was down 53% from the same week last year. 
  • The MBA’s Market Composite Index, a measure of mortgage loan application volume, decreased 7.1% on a seasonally adjusted basis from a week earlier.
  • The refinance share of mortgage activity was 55.8% of total applications, down from 60.3% the previous week.

Applications for refinancing fell dramatically during the week ending Jan. 21, 2022, while mortgage applications also fell, according to the Mortgage Bankers Association's (MBA) weekly survey. 

The MBA’s Refinance Index decreased 13% from the previous week, and was down 53% from the same week last year. 

The MBA’s Market Composite Index, a measure of mortgage loan application volume, decreased 7.1% on a seasonally adjusted basis from a week earlier. On an unadjusted basis, the index decreased 6% from the previous week.

The seasonally adjusted Purchase Index decreased 2% from a week earlier. Unadjusted, the Purchase Index increased 5% from the previous week but was 11% lower than the same week last year.  

"All mortgage rates in MBA's survey continued to climb, with the 30-year fixed-rate rising for the fifth consecutive week to its highest level since March 2020. The 30-year fixed rate is now 77 basis points higher than it was a year ago," said Joel Kan, MBA's associate vice president of economic and industry forecasting. "Unsurprisingly, borrower demand for refinances subsided, with applications falling for the fourth straight week.”

Kan said that after nearly two years of low rates, “there are not many borrowers left who have an incentive to refinance. Of those who are still in the market for a refinance, these higher rates are proving much less attractive to them."    

The decline in purchase activity “was led by a 5% drop in government applications, compared to a modest less-than-1% decline in conventional applications,” he added. “The relative weakness in government purchase activity continues to contribute to higher loan sizes. The average purchase loan size was $433,500, eclipsing the previous record of $418,500 set two weeks ago."  

The refinance share of mortgage activity was 55.8% of total applications, down from 60.3% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 4.4% of total applications.  

The FHA share of total applications decreased to 8.6% from 9.3% the previous week. The VA share of total applications decreased slightly to 9.9% from 10% a week earlier. The USDA share of total applications increased to 0.5% from 0.4% the previous week.  

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 3.72% from 3.64%, with points decreasing to 0.43 from 0.45 (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 backed by the FHA increased to 3.69% from 3.64%, with points increasing to 0.61 from 0.44 (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 3% from 2.95%, with points decreasing to 0.39 from 0.43 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.  

MBA’s survey covers over 75 percent of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks, and thrifts. Base period and value for all indexes is March 16, 1990=100.

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