With mortgage rates increasing to their highest level in 16 years, mortgage applications decreased last week for the eighth time in the past nine weeks, the Mortgage Bankers Association (MBA) said Wednesday.
The Market Composite Index, a measure of mortgage loan application volume, decreased 2% on a seasonally adjusted basis from a week earlier, according to data from the MBA’s Weekly Mortgage Applications Survey for the week ending Oct. 7, 2022. Unadjusted, the index also decreased 2%.
The Refinance Index also fell 2% from the previous week, and was 86% lower than the same week last year. Both the seasonally adjusted and unadjusted Purchase Index decreased 2% from a week earlier as well. The unadjusted Purchase Index was 39% lower than the same week last year.
“Mortgage rates moved higher once again during the first week of the fourth quarter of 2022, with the 30-year conforming rate reaching 6.81%, the highest level since 2006,” said Mike Fratantoni, MBA’s senior vice president and chief economist. “Mortgage rates increased across all product types in MBA’s survey, with the largest, a 20-basis-point increase, for 5-year ARM (adjustable-rate mortgage) loans.”
Fratantoni noted that the ARM share of applications dipped but “remained quite high at 11.7% — just below last week’s level. Application volumes for both refinancing and home purchases declined, and continue to fall further behind last year’s record levels.”
He said last week’s monthly employment report, which showed that job and wage growth continued in September, “is positive for the housing market, as higher incomes support housing demand. However, it also pushed off the possibility of any near-term pivot from the Federal Reserve on its plans for additional rate hikes.”
The Federal Open Market Committee is scheduled to meet again on Nov. 1-2 to decide on whether to continue raising the federal funds rate as it fights to rein in rampant inflation.
MBA said the refinance share of mortgage activity remained unchanged last week at 29% of total applications.
The FHA share of total applications increased to 13.5% from 13.2% the previous week. The VA share of total applications increased to 10.9% from 10.7% the previous week, and the USDA share of total applications slipped to 0.5% from 0.6% the week prior.
Highlights from the survey:
- The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 6.81% from 6.75%, with points increasing to 0.97 from 0.95 (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 with jumbo loan balances (greater than $647,200) increased to 6.25% from 6.14%, with points decreasing to 0.61 from 0.79 (including the origination fee) for 80% 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 6.61% from 6.6%, with points increasing to 1.71 from 1.51 (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 6.12% from 5.96%, with points increasing to 1.30 from 1.08 (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 5.56% from 5.36%, with points decreasing to 0.9 from 1.02 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.
The MBA's 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. The base period and value for all indexes is March 16, 1990=100.
