Mortgage applications decline for fifth week in a row

Purchases rebounded last week, while refinances maintained their downward trajectory, slowing the overall pace of mortgage originations, according to the Mortgage Bankers Association.

The MBA’s Market Composite Index, a measure of loan activity based on surveys of association members, dropped a seasonally adjusted 1.3% for the weekly period ending April 8 and was 39% lower than its level over the same period last year. The week’s decline marked the fifth consecutive decrease of the index.

The Refinance Index tumbled 5% compared to the prior week, declining to its slowest pace since 2019, according to Joel Kan, MBA associate vice president of economic and industry forecasting. The refinance volume was 62% below the level reached one year ago.

An opposite outcome was found in the Purchase Index, which increased 1% on a seasonally adjusted basis from the previous week after declining toward the end of March. Seasonally adjusted purchases were 6.3% lower compared to the same week in 2021.

“In a promising sign of strong purchase demand amidst affordability challenges, both conventional and government purchase applications increased,” Kan said in a press release. Many research reports in early 2022 have shown housing prices rising by close to 20% on an annual basis, making homeownership elusive for many.

Meanwhile, the share of adjustable-rate mortgages relative to overall volume increased for the fourth week in a row. “Higher rates are increasing borrower interest in ARMs,” said Kan. “Their share of applications last week was at 7.4%, which was the highest share since June 2019.” A week earlier, adjustable-rate mortgages accounted for 6.8% of new loans, while at the start of 2022, they accounted for just 3.1% of applications.

The average mortgage size of new applications for the week increased, as purchase prices remained elevated. The overall average application size was up by 0.7% to $392,000 from $389,200 week over week. The mean purchase size inched up by less than a tenth of a percent to $453,000 from $452,600, while refinance loans averaged $288,300, an 0.3% drop from $289,300 a week earlier.

Government-backed applications grabbed a slightly larger share of applications compared to the prior week. Federal Housing Administration-backed mortgages accounted for 9.5% of volume, up from 9.2%. Applications coming via the Department of Veterans Affairs increased to a 9.9% share, compared to 9.8% a week earlier, while U.S. Department of Agriculture-backed loans made up 0.5% of activity, the same as the previous week. The seasonally adjusted Government Index also inched up on a week-over-week basis by 0.5%.

MBA members reported another week of surging interest rates, with averages climbing again across categories tracked by the association.

The average contract interest rate for 30-year fixed mortgages with conforming balances below $647,200 jumped above the 5% mark to land at 5.13%, a 23-basis-point increase from the prior week’s 4.9%.

The contract rate for 30-year fixed non-comforming jumbo loans with balances greater than $647,200 averaged 4.68%, compared to 4.51% seven days earlier.

The average contract rate of 30-year FHA-backed mortgages climbed 5 basis points to 4.95% from 4.9% week over week.

Like the 30-year conforming rate, the 15-year fixed contract average also increased by over 20 basis points compared to one week earlier, rising to 4.34% from 4.11%.

The 5/1 adjustable-rate mortgage average jumped above the 4% threshold, landing at 4.06% last week, up from 3.82% seven days earlier.