After increasing in five of the previous six weeks, mortgage applications fell last week after mortgage rates increased, the Mortgage Bankers Association (MBA) said Wednesday.
According to data from the MBA’s Weekly Mortgage Applications Survey for the week ending April 14, the Market Composite Index — a measure of mortgage loan application volume — decreased 8.8% on a seasonally adjusted basis from a week earlier. Unadjusted, the Index decreased 8% from the previous week.
Both purchase and refinance applications fell. The Refinance Index decreased 6% from the previous week and was 56% lower than the same week last year, according to the survey.
The seasonally adjusted Purchase Index decreased 10% from a week earlier. Unadjusted, the Purchase Index decreased 9% from the previous week and was 36% below where it was at the same point last year.
Buyers Are Rate Sensitive
“Last week’s increase in mortgage rates prompted a pullback in application activity,” said Joel Kan, MBA’s vice president and chief economist. “With more first-time homebuyers in the market, we continue to see increased sensitivity to rate changes. The 30-year fixed rate increased 13 basis points to 6.43%, which led to purchase applications declining 10%.”
Kan said affordability challenges remain, “and there is limited for-sale inventory in many markets across the country, so buyers remain selective on when they act. The 10% drop in FHA purchase applications, and the increase in the average purchase loan size to its highest level in a month are other indications that first-time buyers have pulled back.”
He noted that the spread between the jumbo and conforming 30-year fixed rates widened slightly last week to 15 basis points, but said that “was a much tighter spread compared to the past year. As banks reduce their willingness to hold jumbo loans, we expect this narrowing trend to continue.”
Kan added, “Refinances also declined and accounted for just over a quarter of all applications, as rates remained more than a full percentage point above the same week a year ago. This leaves very little refinance incentive for most homeowners.”
The refinance share of mortgage activity increased to 27.6% of total applications from 27% the previous week.
The adjustable-rate mortgage (ARM) share of activity increased to 6.3% of total applications.
The FHA share of total applications increased to 12.7% from 12.3% the previous week. The VA share of total applications decreased to 11.7% from 12.8% the week prior. The USDA share of total applications remained unchanged at 0.5% from the previous week.
Mortgage rates
Note: The points listed include the origination fee and are for 80% loan-to-value (LTV) ratio loans.
- The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased to 6.43% from 6.3%, with points increasing to 0.63 from 0.55. The effective rate increased from last week.
- The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $726,200) increased to 6.28% from 6.26%, with points increasing to 0.51 from 0.42. The effective rate increased from last week.
- The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 6.33% from 6.29%, with points increasing to 0.94 from 0.91. The effective rate increased from last week.
- The average contract interest rate for 15-year fixed-rate mortgages increased to 5.89% from 5.78%, with points increasing to 0.65 from 0.57. The effective rate increased from last week.
- The average contract interest rate for 5/1 ARMs increased to 5.56% from 5.51%, with points decreasing to 0.72 from 0.90. The effective rate decreased 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.
