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Mortgage Applications Follow 1st Weekly Increase With Similar Decline

David Krechevsky
Sep 28, 2022
Photo credit: Getty Images/phototechno

After rising nearly 4% the previous week, applications fell nearly 4% last week as interest rates rose.

KEY TAKEAWAYS
  • The Market Composite Index decreased 3.7% last week on a seasonally adjusted basis from a week earlier.
  • The Refinance Index fell 11% from the previous week, and was down 84% from the same week last year. 
  • The 30-year fixed rate was 6.52% last week, up more than a quarter of a point from the previous week and its highest level since mid-2008.

After rising nearly 4% the week before, mortgage applications fell nearly 4% last week, the Mortgage Bankers Association said Wednesday.

According to data from the MBA’s Weekly Mortgage Applications Survey for the week ending Sept. 23, the Market Composite Index — a measure of mortgage loan application volume — decreased 3.7% last week on a seasonally adjusted basis from a week earlier. That followed a 3.8% increase during the week ended Sept. 16, which had been the first increase in six weeks. On an unadjusted basis, the Market Composite Index decreased 4% compared with the previous week.

Most of the decline was due to a drop in refinancing as interest rates rose. The Refinance Index fell 11% from the previous week, and was down 84% from the same week last year. 

The seasonally adjusted Purchase Index dipped 0.4% from one week earlier. Unadjusted, the Purchase Index decreased 1% from a week earlier and was 29% lower than the same week last year.

“Applications for both purchase and refinances declined last week as mortgage rates continued to increase to multi-year highs following more aggressive policy measures from the Federal Reserve to bring down inflation,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “Additionally, ongoing uncertainty about the impact of the Fed’s reduction of its MBS (mortgage-backed securities) and Treasury holdings is adding to the volatility in mortgage rates.”

The 30-year fixed rate was 6.52% last week, up more than a quarter of a point from the previous week and its highest level since mid-2008. After a brief pause in July, Kan noted, mortgage rates have increased more than a percentage point over the past six weeks.

“With rates now more than double what they were a year ago, the pace of refinancing is running at a 22-year low, and last week was more than 80% below last year’s level,” he said. “Similarly, purchase activity was 29% lower than a year ago, with higher rates and economic uncertainty weighing on buyers’ decisions.”

The refinance share of mortgage activity decreased to 30.2% of total applications from 32.5% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 10.4% of total applications.

“With the recent jump in rates, the ARM share reached 10% of applications and almost 20% of dollar volume,” Kan said. “ARM loans remain a viable option for qualified borrowers in this rising rate environment.”

The FHA share of total applications decreased to 12.5% from 13.3% the week prior. The VA share of total applications decreased to 10.7% from 10.9% the prior week. The USDA share of total applications remained unchanged at 0.6% from a week earlier.

Other highlights from the MBA report:

  • The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 6.52% from 6.25%, with points increasing to 1.15 from 0.71 (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 6.01% from 5.79%, with points increasing to 0.7 from 0.46 (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 6.17% from 5.85%, with points increasing to 1.31 from 1.15 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
  • The average contract interest rate for 15-year fixed-rate mortgages increased to 5.70% from 5.40%, with points increasing to 1.33 from 1.06 (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 5.30% from 5.14%, with points increasing to 1.28 from 0.99 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.

The MBA’s survey covers more than 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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