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Mortgage Applications Down, Interest Rates Up

Steve Goode
Apr 27, 2022
Mortgage Bankers Association Logo

The recent decrease in purchase applications is an indication of potential weakness in home sales in the coming months.

Mortgage applications decreased by 8.3% from last week, according to the Mortgage Bankers Association weekly survey released Wednesday.

According to the survey, which covers more than 75% of all U.S. retail mortgage applications, the average contract interest rate for a 30-year, FHA backed, mortgage also increased from 5.11% to 5.29%.

“With mortgage rates increasing last week to the highest level since 2009, applications continued to decline. Overall application activity fell to the lowest level since 2018, with both purchase and refinance applications posting declines. Refinance applications were 70% below the same week a year ago, when the 30-year fixed rate was in the 3% range,” Joel Kan, MBA’s associate vice president of economic and industry forecasting, said. “The drop in purchase applications was evident across all loan types. Prospective homebuyers have pulled back this spring, as they continue to face limited options of homes for sale along with higher costs from increasing mortgage rates and prices. The recent decrease in purchase applications is an indication of potential weakness in home sales in the coming months.

Kan added that  during a period of high home-price growth and rapidly increasing mortgage, borrowers are mitigating higher monthly payments by applying for adjustable rate mortgage loans.

“The ARM share of applications last week was over 9% by loan count and 17% based on dollar volume, Kan said. “At 9%, the ARM share was double what it was three months ago, which also coincides with the 1.5 percentage point increase in the 30-year fixed rate.”

The survey also noted that the refinance index decreased 9% from the previous week and was 71% lower than the same week one year ago, and that the refinance share of mortgage activity decreased to 35.0% of total applications from 35.7% the previous week. 

According to the survey, the average contract interest rate for 15-year fixed-rate mortgages increased to 4.68% from 4.44%, while the average contract interest rate for 5/1 ARMs increased to 4.28% from 4.09%.

 

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