Mortgage applications decline for a second week, despite falling rates

After falling to its lowest rate of activity in almost a year and a half, the influx of mortgage apps slowed even further last week, according to the latest data from the Mortgage Bankers Association.

The Market Composite Index, which tracks total mortgage volume based on a survey of MBA members, dropped a seasonally adjusted 1.8% from the prior pre-holiday week ending July 2. On an unadjusted basis, the decrease came in at 2%. Compared to the same week in 2020, the index was 19.2% lower, seasonally adjusted.

Both refinance and purchase activity posted weekly declines. The Refinance Index was 2% lower than the previous week and 8% below the level seen in the same week a year ago. The Purchase Index fell 1% both on a seasonally adjusted and unadjusted basis, with the unadjusted volume 14% lower than one year earlier.

Refinance applications accounted for a smaller share of total activity, decreasing to 61.6% from 61.9% the prior week. Refinance activity has trended lower than 2020 levels the past four months, according to Joel Kan, MBA’s associate vice president of economic and industry forecasting.

“The 30-year fixed rate was 11 basis points lower than the same week a year ago, but many borrowers previously refinanced at even lower rates,” he said in a statement.

Adjustable-rate applications also decreased its share, falling to 3.3% from 3.6% a week earlier.

Borrowers taking advantage of government-sponsored mortgage programs saw an uptick in total application share compared to the prior reporting period. Federal Housing Authority-backed mortgages accounted for 9.8% of volume compared to 9.5% one week earlier, while Veterans Administration loans increased to 10.8% from 10.5%. The share of activity coming through U.S. Department of Agriculture loan programs remained unchanged from the previous week at 0.5%.

Average loan size shrinks
After posting an increase a week earlier, the average loan size across all mortgage applications retreated downward to $335,400 from $338,600, a 0.9% decline. Average size of refinance mortgages saw a 1.9% drop to $291,900 from $297,700, while the purchase-size average inched up less than one basis point to $405,300 from $405,000.

“Swift home-price growth across much of the country, driven by insufficient housing supply, is weighing on the purchase market and is pushing average loan amounts higher,” Kan noted. Higher housing prices have suppressed buyer optimism according to recent reports.

Interest rates drop across the board

• The average contract interest rate of 30-year fixed-rate mortgages with conforming loan balances of $548,250 or less dropped to 3.15%, down from 3.2% a week earlier.
• The average contract interest rate of 30-year fixed-rate jumbo loans (with balances greater than $548,250) came in at 3.2%, compared to 3.23% the previous week.
• The average contract interest rate of 30-year fixed-rate mortgages backed by the Federal Housing Authority dipped to 3.17%, a two-basis-point decrease from 3.19% the prior week.
• The average contract interest rate of 15-year fixed-rate mortgages declined four basis points to 2.52%, compared to 2.56% the previous week.
• The interest rate for 5/1 adjustable-rate mortgages also posted a four-basis-point weekly drop, falling to 2.94% from 2.98%.