Mortgage volumes tumble, with average loan sizes also decreasing

Mortgage activity dropped off last week, as rising interest rates helped put the brakes on both new purchases and refinances.

The Mortgage Bankers Association Market Composite Index, a weekly measure of application activity based on data submitted by MBA members, dropped a seasonally adjusted 6.3% for the period ending Oct. 15, with the unadjusted index also falling 6% from one week earlier. Compared to activity in the same week of 2020, seasonally adjusted volume came in 19% lower.

Both refinance and purchase applications recorded volume drops on a weekly and yearly basis. The Refinance Index dipped 7% from the prior week and was 22% lower compared to the same week in 2020. The Purchase Index dropped 5% on both a seasonally adjusted and unadjusted basis compared to the previous week and was 12% unadjusted below levels from the same week last year.

“Insufficient housing supply and elevated home-price growth continue to limit options for would-be buyers,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting, in a press statement. Recent data from Zillow showed inventory down almost 20% from September 2020, while home values had increased over 18% annually on average.

“Refinance applications declined for the fourth week as rates increased, bringing the refinance index to its lowest level since July 2021,” Kan also noted.

The share of refinances relative to total weekly mortgage activity decreased for the third week in a row as well, accounting for 63.3% of all applications, compared to 63.9% a week earlier. Adjustable-rate mortgages also represented a smaller percentage of weekly volume, edging down to 3.3% from 3.4% seven days earlier.

Government-sponsored activity kept its share of applications at close to the same mark week over week. Loans backed by the Federal Housing Administration accounted for 10.2% of all activity, the same as one week earlier. Veterans Administration-sponsored applications increased its share to 10.4%, edging up from 10.2%, while mortgage applications backed by the U.S. Department of Agriculture inched up to 0.5% from 0.4%.

The average mortgage size also decreased during the period, retreating to its lowest point since mid-September. The mean dollar amount among new mortgage activity overall dropped to $335,000 from $341,400 week over week, a 1.9% decline. The average size of purchase loans inched downward by 0.3% to $407,900 from $409,300, while average refinance amounts came out to $292,800, falling 2.2% from the prior week’s $299,400.

Interest rates continue climbing
Fixed rates continue moving upward, with most 30-year loans and the 15-year rate all rising from the prior reporting period.

• The average contract interest rate for 30-year fixed-rate mortgages with conforming balances of $548,250 or less climbed to 3.23% — the highest it’s been since April — from 3.18% a week earlier. The 30-year conforming rate has gone up by 20 basis points in the past month.

• The 30-year fixed-rate mortgage with jumbo loan balances of greater than $548,250 averaged 3.26%, up four basis points from 3.22% week over week. 

• The average contract interest rate for 30-year loans backed by the FHA registered the only decrease among primary rate types for the week, dropping to 3.17% from 3.2% a week earlier.

• The 15-year fixed-rate mortgage average rose to its highest since July, coming in at 2.54%, up six basis points from 2.48% the previous week.

• The 5/1 adjustable-rate average also increased in the weekly reporting period, edging up to 3.09% from 3.08%.