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Mortgage Applications Fall For 3rd Straight Week

David Krechevsky
Aug 31, 2022
mortgage application

Refinance share of applications fell to 30.1%.

KEY TAKEAWAYS
  • The Market Composite Index, a measure of mortgage loan application volume, decreased 3.7% on a seasonally adjusted basis from the previous week.
  • The 30-year fixed-mortgage rate increased for the second week in a row to 5.8%, reaching its highest level since mid-July.
  • Purchase applications have declined in eight of the last nine weeks.

Mortgage applications decreased for the third week in a row, the Mortgage Bankers Association (MBA) said Wednesday.

According to the MBA’s Weekly Mortgage Applications Survey for the week ending Aug. 26, 2022, the overall Market Composite Index, a measure of mortgage loan application volume, decreased 3.7% on a seasonally adjusted basis from the previous week. On an unadjusted basis, the index decreased 5% compared with the previous week.

The Refinance Index decreased 8% from the previous week, but was 83% lower than the same week last year. 

The seasonally adjusted Purchase Index decreased 2% from a week earlier. Unadjusted, the Purchase Index decreased 4% compared with the previous week, and was 23% lower than the same week one year ago.

“The 30-year fixed-mortgage rate increased for the second week in a row to 5.8%, reaching its highest level since mid-July,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “Mortgage rates and Treasury yields rose last week, as Federal Reserve officials indicated that short-term rates would stay higher for longer.”

Kan said mortgage rates have been volatile over the past month, bouncing between 5.4% and 5.8%. 

“In another sign that market volatility has picked up, the average rate on a jumbo loan was 5.32%, 48 basis points lower than for a conforming loan,” he said. “This spread reached a high of over 50 basis points in July — and had narrowed — before now widening again.”

He noted that application volume dropped and remained at a multi-decade low last week, “led by an 8% decline in refinance applications, which now make up only 30% of all applications.

Purchase applications have declined in eight of the last nine weeks, as demand continues to shrink due to higher rates and a weaker economic outlook.”

“However,” he added, “rising inventories and slower home-price growth could potentially bring some buyers back into the market later this year.”

Highlights of the MBA’s survey:

  • The refinance share of mortgage activity dipped to 30.3% of total applications, from 31.1% the prior week. 
  • The adjustable-rate mortgage (ARM) share of activity increased to 8.5% of total applications.
  • The FHA share of total applications increased to 13% from 12.5% the week prior. 
  • The VA share of total applications decreased to 11.1% from 11.6% the week prior. 
  • The USDA share of total applications decreased to 0.6% from 0.7% the week prior.

The MBA said the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 5.8% from 5.65%, with points increasing to 0.71 from 0.68 (including the origination fee) for 80% loan-to-value ratio (LTV) loans. The effective rate increased from last week. 

A look at other interest rates: 

  • The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 5.57% from 5.43%, with points decreasing to 1.09 from 1.10 (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 5.1% from 5.01%, with points decreasing to 0.82 from 0.84 (including the origination fee) for 80% LTV loans. The effective rate increased from last week. 
  • The average contract interest rate for 5/1 ARMs decreased to 4.78% from 4.81%, with points decreasing to 0.61 from 0.74 (including the origination fee) for 80% LTV loans. The effective rate decreased 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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