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Mortgage Refinancing Continues Sharp Application Decline

Keith Griffin
Apr 06, 2022
Photo credit: Getty Images/Andrii Yalanskyi

MBA says overall mortgage volume continues to decline, driven by high rates

KEY TAKEAWAYS
  • Refinance share of mortgage activity decreased to 38.8% of total applications from 40.6% the previous week.
  • Overall mortgage applications down 6.3% since prior week.
  • Insufficient for-sale inventory is restraining purchase activity.

Mortgage refinancing continues its downward spiral. Applications dropped 10% for the week ending April 1, 2022, and are down 62% from the same period in 2021, according to the Mortgage Bankers Association’s Weekly Mortgage Applications Survey.

Overall, mortgage applications decreased 6.3% on a seasonally adjusted basis from a week earlier, according to the Market Composite Index, a measure of mortgage loan application volume. The seasonally adjusted Purchase Index decreased 3% from a week earlier and was 9% lower than the same week last year.

“As higher rates reduce the incentive to refinance, application volume dropped to its lowest level since the spring of 2019,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting, in a statement. "The refinance share of all applications dipped to 38.8%, down from 51% a year ago."

Kan said mortgage application volume "continues to decline due to rapidly rising mortgage rates, as financial markets expect significantly tighter monetary policy in the coming months. The 30-year fixed mortgage rate increased for the fourth consecutive week to 4.90% and is now more than 1.5 percentage age points higher than a year ago.”

The one area showing growth in market share is adjustable rate mortgages (ARMs), but it’s a segment still showing rate increases, too. The ARM share of activity increased to 6.8% of total applications. The average contract interest rate for 5/1 ARMs increased to 3.82% from 3.7%, with points decreasing to 0.46 from 0.54 (including the origination fee) for 80% LTV loans. The effective rate increased from last week. 

“The hot job market and rapid wage growth continue to support housing demand, despite the surge in rates and swift home-price appreciation. However, insufficient for-sale inventory is restraining purchase activity," Kan said. "Additionally, the elevated average purchase loan size, and steeper 8% drop in FHA purchase applications, are both indicative of first-time buyers being disproportionately impacted by supply and affordability challenges."

The FHA share of total applications decreased to 9.2% from 9.3% the week prior. The VA share of total applications increased to 9.8% from 9.5% the week prior. The USDA share of total applications remained unchanged at 0.5% from the week prior.

The average contract interest rate for 30-year, fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 4.9% from 4.8%, with points decreasing to 0.53 from 0.56 (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 4.51% from 4.40%, with points decreasing to 0.34 from 0.44 (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 4.9% from 4.66%, with points decreasing to 0.68 from 0.71 (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 4.11% from 4.01%, with points decreasing to 0.53 from 0.55 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.

The 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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