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Mortgage Applications Hit 25-Year Low

Oct 05, 2022
mortgage application

MBA Market Composite Index fell 14.2% last week to the slowest pace since 1997.

KEY TAKEAWAYS
  • The Market Composite Index, a measure of mortgage loan application volume, plummeted 14.2% on a seasonally adjusted basis.
  • The Refinance Index decreased 18% from the previous week and was 86% lower than the same week one year ago.
  • The seasonally adjusted Purchase Index decreased 13% from a week earlier and was down 37% from a year earlier.

Mortgage applications plunged more than 14% last week from the week before, falling to the slowest pace in 25 years, the Mortgage Bankers Association (MBA) said Wednesday.

The Market Composite Index, a measure of mortgage loan application volume, plummeted 14.2% on a seasonally adjusted basis, according to MBA’s Weekly Mortgage Applications Survey for the week ending Sept. 30, 2022. It was the seventh decline in the past eight weeks. Unadjusted, the index decreased 14% compared with the previous week. 

The Refinance Index decreased 18% from the previous week and was 86% lower than the same week one year ago, the MBA said. 

The seasonally adjusted Purchase Index decreased 13% from a week earlier. The unadjusted Purchase Index also decreased 13% compared with the previous week and was 37% lower than the same week last year.

“Mortgage rates continued to climb last week, causing another pullback in overall application activity, which dropped to its slowest pace since 1997,” said Joel Kan, the MBA’s associate vice president of economic and industry forecasting. “The 30-year fixed rate hit 6.75% last week — the highest rate since 2006.”

“The current rate has more than doubled over the past year and has increased 130 basis points in the past seven weeks alone,” Kan noted. “The steep increase in rates continued to halt refinance activity and is also impacting purchase applications, which have fallen 37% behind last year’s pace. Additionally, the spreads between the conforming rate compared to jumbo loans widened again, and we saw the ARM (adjustable-rate mortgage) share rise further to almost 12% of applications.”

Kan added that the arrival of Hurricane Ian in Florida last week also likely had an impact, because it prompted widespread closings and evacuations. “Applications in Florida fell 31%, compared to 14% overall, on a non-seasonally adjusted basis,” he said.

The refinance share of mortgage activity decreased to 29% of total applications from 30.2% the previous week. The ARM share of activity increased to 11.8% of total applications. The FHA share of total applications increased to 13.2% from 12.5% the previous week. The VA share of total applications remained unchanged at 10.7% from the week prior, while the USDA share of total applications remained unchanged at 0.6% from the previous week.

Other key 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 6.75% from 6.52%, with points decreasing to 0.95 from 1.15 (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 6.14 percent from 6.01 percent, with points increasing to 0.79 from 0.7 (including the origination fee) for 80 percent 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 6.60% from 6.17%, with points increasing to 1.51 from 1.31 (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 5.96% from 5.7%, with points decreasing to 1.08 from 1.33 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
  • The average contract interest rate for 5/1 ARMs increased to 5.36% from 5.3%, with points decreasing to 1.02 from 1.28 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The MBA 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.

About the author
David Krechevsky was an editor at NMP.
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