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Mortgage Applications Fall To Lowest Level In 25 Years

David Krechevsky
Oct 18, 2022
Photo credit: Getty Images/phototechno

Applications have now decreased in 9 of the past 10 weeks.

KEY TAKEAWAYS
  • The Market Composite Index decreased 4.5% on a seasonally adjusted basis from a week earlier.
  • The Refinance Index fell 7% from the previous week, and was 86% lower than the same week one year ago.
  • Mortgage applications are now in their fourth month of declines.

Mortgage applications continued their steady decline last week, falling for the ninth time in the past 10 weeks to their lowest level in 25 years, the Mortgage Bankers Association (MBA) said Wednesday.

The Market Composite Index — a measure of mortgage loan application volume — decreased 4.5% 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. 14, 2022. On an unadjusted basis, the index decreased 4% compared to the previous week. 

The Refinance Index fell 7% from the previous week, and was 86% lower than the same week one year ago, the MBA said. 

The seasonally adjusted Purchase Index slipped 4% from one week earlier. The unadjusted Purchase Index decreased 3%, and was 38% lower than the same week last year.

“Mortgage applications are now into their fourth month of declines, dropping to the lowest level since 1997, as the 30-year fixed mortgage rate hit 6.94% — the highest level since 2002,” said Joel Kan, MBA’s vice president and deputy chief economist. “The speed and level to which rates have climbed this year have greatly reduced refinance activity and exacerbated existing affordability challenges in the purchase market.”

Kan noted that residential housing activity — ranging from new housing starts to home sales — has been on a downward trend coinciding with the increase in rates. 

“The current 30-year fixed rate is now well over 3 percentage points higher than a year ago, and both purchase and refinance applications were down 38% and 86% over the year, respectively,” he said.

“With rates at these high levels, the ARM (adjustable-rate mortgage) share rose to 12.8% of all applications, which was the highest share since March 2008,” Kan added. “ARM loans continue to remain a viable option for borrowers who are still trying to find ways to reduce their monthly payments.”

The refinance share of mortgage activity dipped to 28.3% of total applications, down from 29% the previous week. 

The FHA share of total applications ticked up to 13.6% from 13.5% the week prior. The VA share of total applications slipped to 10.7% from 10.9% the week prior. The USDA share of total applications remained unchanged at 0.5% from the previous week.

Other highlights of the report:

  • The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 6.94% from 6.81%, with points decreasing to 0.95 from 0.97 (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 6.31% from 6.25%, with points increasing to 0.67 from 0.61(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 6.63% from 6.61%, with points decreasing to 1.60 from 1.71 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.
  • The average contract interest rate for 15-year fixed-rate mortgages decreased to 6.09% from 6.12%, with points decreasing to 1.18 from 1.3 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.
  • The average contract interest rate for 5/1 ARMs increased to 5.65% from 5.56%, with points remaining at 0.9 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.

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. Base period and value for all indexes is March 16, 1990=100.

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