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Mortgage Applications Fall For 12th Straight Week: MBA

David Krechevsky
Apr 13, 2022
Applications for home loans all but dried up, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending Nov. 11

Rapid rise in mortgage rates slows purchase originations and refinances.

KEY TAKEAWAYS
  • MBA said the Market Composite Index, a measure of mortgage loan application volume, decreased 1.3% on a seasonally adjusted basis from one week earlier.
  • The last time mortgage applications increased from the previous week in the MBA’s survey was the week ending Jan.14, 2022.
  • The Refinance Index decreased 5% for the week ending April 8 from the previous week, and was 62% lower than the same week one year ago, the report said.
  • MBA revises 2022 mortgage originations forecast downward following inflation report.

Mortgage applications decreased 1.3% from a week earlier, the Mortgage Bankers Association said today, the 12th consecutive week of declines as mortgage rates continue to climb.

In its Weekly Mortgage Applications Survey for the week ending April 8, 2022, the MBA said the Market Composite Index, a measure of mortgage loan application volume, decreased 1.3% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the index decreased 1% compared with the previous week. 

The last time mortgage applications increased from the previous week in the MBA’s survey was the week ending Jan.14, 2022.

The Refinance Index decreased 5% for the week ending April 8 from the previous week, and was 62% lower than the same week one year ago, the report said.

The seasonally adjusted Purchase Index increased 1% from a week earlier. The unadjusted Purchase Index increased 2% compared with the previous week, but was 6% lower than the same week last year, the MBA said.

“Mortgage rates across all loan types continued to move higher, with the 30-year fixed rate exceeding the 5% mark to 5.13% — the highest since November 2018. Refinance activity as a result declined to the slowest weekly pace since 2019,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “Higher rates are increasing borrower interest in adjustable-rate mortgages (ARMs): Their share of applications last week was at 7.4%, which was the highest share since June 2019.”

Kan added that, “In a promising sign of strong purchase demand amid affordability challenges, both conventional and government purchase applications increased.”

Given the faster-than-expected increase in mortgage rates, as well as the likelihood of more aggressive action from the Federal Reserve to curb inflation — the Labor Department reported the Consumer Price Index rose 8.5% in March from a year earlier, the largest jump in 40 years — MBA has revised its April 2022 forecast, the organization said.

MBA’s forecast now calls for mortgage originations to total $2.58 trillion in 2022 — a 35.5% decline from 2021. Purchase originations, though, are still forecasted to reach a record $1.72 trillion this year — a 4% increase from 2021 — but refinance originations are now expected to fall 64% from 2021 to $841 billion.

“Mortgage rates have spiked more than 1.5 percentage points thus far in 2022,” Mike Fratantoni, MBA’s senior vice president and chief economist, said. “This rapid increase in rates, caused by a much more rapid pace of rate hikes and balance sheet reduction from the Federal Reserve, is in response to the booming job market and inflation being at a 40-year high. The jump in mortgage rates will slow the housing market and further reduce refinance demand the rest of this year.” 

“Higher home prices and rates as well as ongoing supply constraints are now expected to lead to an annual decline in existing home sales,” Fratantoni said. “However, MBA continues to expect purchase originations to reach a … record in 2022. Even though existing sales volume will be slightly lower than last year, the continued growth in new home sales and the rapid rise in home prices should deliver a smaller, but solid, 4% annual growth in purchase origination volume.”

The refinance share of mortgage activity decreased to 37.1% of total applications from 38.8% the previous week, the MBA said. The ARM share of activity increased to 7.4% of total applications.

The FHA share of total applications increased to 9.5% from 9.2% the previous week. The VA share of total applications ticked up to 9.9% from 9.8% the week prior. The USDA share of total applications remained unchanged at 0.5%. 

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 5.13% from 4.9%, with points increasing to 0.63 from 0.53 (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 15-year fixed-rate mortgages increased to 4.34% from 4.11%, with points increasing to 0.65 from 0.53 (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 4.06% from 3.82%, with points increasing to 0.68 from 0.46 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.

The survey covers over 75% 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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