Mortgage volume drops, even as purchase activity bucks seasonal trends

Mortgage volumes decreased for the second time in three weeks, as rising rates drove down borrowing, according to the Mortgage Bankers Association.

The Market Composite Index — which tracks loan application volume through a survey of the association’s members — declined 2.8% on a seasonally adjusted basis for the weekly period ending Nov. 12. The unadjusted index also dropped by 4% week over week. Seasonally adjusted volume sat 23% lower compared to the same week in 2020.

“Activity has been particularly sensitive to rate movements,” Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in a press release, noting their upswing over the previous seven days.

Kan attributed much of the week’s decline to decreases in conventional and Federal Housing Administration-backed refinance applications. The Refinance Index fell 5% week-over-week, continuing a downward trend this fall. Refinance volumes dropped in seven out of the last eight weeks, with numbers also 31% below their year-ago level. Refinances also took a smaller share of total overall applications compared to the previous week, falling to 62.9% from 63.5%.

But the Purchase Index registered a slight seasonally adjusted increase, climbing 2% to help temper the slowdown in refinances. On an unadjusted basis, purchase volume dropped 2% from the previous week, with the unadjusted index also coming in 6% under its level from the same weekly period the year prior. Still, the purchase trend was a promising, if unusual development, according to Kan.

“Purchase applications increased for both conventional and government loan segments, as housing demand continues to show resiliency at a time — late fall — when home-buying activity typically slows,” Kan said. “The second straight increase in purchase applications suggests that stronger sales activity may continue in the weeks to come.”

The average size of new loans also increased for the third week in a row, even as the mean purchase size retreated. The overall average edged up 1.2% to $344,100, compared to the previous week’s $339,900. Average refinance size climbed 2.4% higher to $307,200 from $300,000 one week earlier. But the average amount on new purchase applications slid to $406,500 from $409,400, a drop of 0.7%. Average purchase size still remains elevated compared to the summer, coming in above $400,000 for the eighth consecutive week.

Government-backed programs took a larger share of volume relative to overall activity compared to the prior week. Federal Housing Administration-sponsored loans accounted for 8.9% of new applications, inching up from an 8.8% share seven days earlier. Loans taken through the Department of Veterans Affairs increased to 10.8% of volume, compared to 10.2% the prior week, while U.S. Department of Agriculture-backed mortgages remained unchanged at 0.5%.

The share of adjustable-rate mortgage applications edged back upwards as well to 3.2% of volume, up from 3.1% the previous week.

After two weeks of declines, interest rates moved upward again, rising in almost all categories according to the MBA.

• The average contract interest rate for 30-year fixed-rate mortgages with conforming balances of $548,250 or less jumped four basis points to 3.2% compared to 3.16% a week earlier.

• The 30-year jumbo fixed rate mortgage for balances greater than $548,250 remained unchanged week over week at 3.26%. 

• The 30-year fixed-rate average for loans backed by the Federal Housing Administration climbed to 3.23% after falling to 3.18% the prior week.

• After two weeks of decreases, the 15-year fixed-rate mortgage average headed back upwards, rising to 2.56%, a four-basis-point uptick from 2.52% reported seven days earlier.

• The 5/1 adjustable rate average also came in seven basis points higher compared to the previous period, coming in at 2.89%, up from 2.82%.