Refinances Fade Out, ARM Loans Enter The Scene – NMP Skip to main content

Refinances Fade Out, ARM Loans Enter The Scene

Apr 20, 2022
ARM loans
Associate Editor

Since ARM loans typically have lower rates than fixed mortgages, they’ve become more attractive to borrowers.

KEY TAKEAWAYS
  • Mortgage applications fell 5% on a seasonally adjusted basis from the previous week.
  • The refinance share of mortgage activity decreased to 35.7% of total applications from 37.1% the previous week.
  • The adjustable rate mortgage (ARM) share of activity increased to 8.5% of total applications — its highest level since 2019.
  • The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances increased to 5.2% from 5.13% the week prior.

Mortgage applications fell 5% on a seasonally adjusted basis from the previous week, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending on April 15, 2022. 

“Ongoing concerns about rapid inflation and tighter US monetary policy continued to push Treasury yields higher, driving mortgage rates to their highest level in over a decade,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Rates increased across the board for all loan types, with the 30-year fixed rate hitting 5.2%, the highest level since 2010.”

The Market Composite Index fell 5% on a seasonally adjusted basis and 4% on an unadjusted basis. The Refinance Index decreased 8% from the previous week and was 68% lower than the same week a year ago. The seasonally adjusted Purchase Index fell 3% from the previous week and 2% on an unadjusted basis; that’s a 14% drop from the same week last year. 

“The 30-year rate has increased 70 basis points over the past month and is 2 full percentage points higher than a year ago,” Kan added. “The recent surge in mortgage rates has shut most borrowers out of rate/term refinances, causing the refinance index to fall for the sixth consecutive week. In a housing market facing affordability challenges and low inventory, higher rates are causing a pullback or delay in home purchase demand as well. Home purchase activity has been volatile in recent weeks and has yet to see the typical pick up for this time of the year.”

The refinance share of mortgage activity decreased to 35.7% of total applications from 37.1% the previous week. Meanwhile, the adjustable rate mortgage (ARM) share of activity increased to 8.5% of total applications. 

The MBA found that the ARM loan share of applications reached its highest level last week since 2019 at 8.5%. Since ARM loans typically have lower rates than fixed mortgages, they’ve become more attractive to borrowers facing home purchase loan amounts close to record highs. 

The FHA share of total applications also increased slightly to 9.9% from 9.5% the week prior. The VA share of total applications increased to 10.1% from 9.9% the previous week. Also, the USDA share of total applications remained unchanged at 0.5% from the week prior. 

Changes in mortgage rates for each loan type is as follows: 

  • The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances increased to 5.2% from 5.13% the week prior, with points increasing to 0.66 from 0.63 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.
  • The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances increased to 4.76% from 4.68% the week prior, with points increasing to 0.46 from 0.37 (including the origination fee) for 80% LTV loans. 
  • The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 5.11% from 4.95%, with points increasing to 0.90 from 0.75 (including the origination fee) for 80% LTV loans.
  • The average contract interest rate for 15-year fixed-rate mortgages increased to 4.44% from 4.34% the week prior, with points increasing to 0.90 from 0.75 (including the origination fee) for 80% LTV loans.
  • The average contract interest rate for 5/1 ARMs increased to 4.09% from 4.06% the week prior, with points decreasing to 0.56 from 0.68 (including the origination fee) for 80% LTV loans.
About the author
Associate Editor
Katie Jensen is a mortgage news reporter at NMP.
Published
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