After mortgage applications had been coming in at their most sluggish pace in years, activity increased for two consecutive weeks. However, that amount is still well below the level from a year ago, the Mortgage Bankers Association said.
The MBA’s Market Composite Index, a measure of weekly application volumes based on surveys of MBA members, rose a seasonally adjusted 4.2% for the period ending June 17. But compared to the same seven-day stretch in 2021, volumes were 53% lower.
The upward move came largely thanks to increased purchase activity despite a spike in interest rates, while refinance volumes dropped further. The Refinance Index fell 3% from the previous week, with new applications 77% below their level of a year ago.
Meanwhile, the seasonally adjusted Purchase Index climbed for a second week, jumping 8% week over week.
“Purchase applications increased for the second straight week — driven mainly by
conventional applications,” said Joel Kan, associate vice president of economic and industry forecasting, in a press release. “However, purchase activity was still 10% lower than a year ago, as inventory shortages and higher mortgage rates are dampening demand.”
A noticeable pullback in demand has been reported recently among various researchers, as the first signs of price cuts emerge, particularly in Western U.S. markets, following more than a year of record growth. Price reductions have been evident in diminishing purchase-loan sizes, which have shrunk after consistently setting record highs early this year.
“The average loan size, at just over $420,000, is well below its $460,000 peak earlier this year and is potentially a sign that home price-growth is moderating,” Kan said.
Last week’s average purchase-loan size, though, saw a small uptick of 0.7%, rising to $422,100 from $419,000. The mean refinance amount on new applications also increased 2.3% to $290,000 from $283,400 seven days earlier. The mean size of all new mortgage applications increased 1.8% to $382,800 from $376,000 week over week.
The share of adjustable-rate mortgage applications relative to all activity surged last week, making up 10.6% of volume, up from 8.1%. Refinances accounted for only 29.7% of total applications, down from 31.7% a week earlier. Last year, throughout most of the spring and summer, refinances consistently accounted for at least 60% of weekly activity.
The depths to which refinances have fallen over the past 12 months are now also trackable not only by volume, but on a dollar basis as well, thanks to researchers at Fannie Mae. The government-sponsored enterprise’s new weekly Refinance Application Level Index, calculated through data sourced from its automated underwriting system, found a week-over-week decrease of 6.3% in the total refinance dollar volume, while on an annual basis, the reduction was 70.8%.
“Refinance application dollar volume continued its downward trend last week, ending at the lowest point this year for a non-holiday-shortened week,” said Fannie Mae Chief Economist Doug Duncan in a press release.
In comparison to periods further back, current refinance amounts are almost 80% below levels from the COVID boom in the third quarter of 2020, but 41% above the refi slowdown in late 2018.
“Thus far in 2022, refi dollar volume has fallen significantly as we’ve moved into a consistently higher mortgage rate environment and is now lower than the average level during the 2010 to 2018 period,” Duncan added.
Government-backed loan activity increased by 1% seasonally adjusted last week, according to MBA — down for refinances, but up in purchases. The share of federal loans relative to total volume came in lower, though. Federal Housing Administration-backed applications increased to 12% of new loans, up from 11.8% one week prior, but the share of loans sponsored by the Department of Veterans Affairs fell to 10.7% from 11.7% seven days earlier. Mortgages coming through U.S. Department of Agriculture programs made up 0.5% of the application pool, down from 0.6% week over week.
Mortgage rates reported by MBA members accelerated last week, with the 30-year conforming rate coming in at its highest since November 2008, according to Kan. Rates are almost double from where they were a year ago, he noted.
“All other loan types also increased by at least 20 basis points, influenced by the Federal Reserve’s 75-basis-point rate hike and commentary that more are coming to slow inflation,” Kan said.
The contract interest rate for 30-year fixed conforming loans with balances of $647,200 or below averaged 5.98%, a 33-basis point jump from 5.65% the previous week. The one-week surge was the largest since 2009, Kan said.
The average 30-year jumbo-loan contract fixed rate for balances above the conforming amount increased 24 basis points to 5.49% from 5.25% one earlier.
The 30-year fixed mortgage backed by the FHA came in with an average contract rate of 5.62% compared to 5.36% seven days earlier.
The average contract rate of the 15-year fixed mortgage also headed upward by 26 basis points, finishing at 5.05% compared to 4.79% one week prior.
The average contract interest rate for 5/1 adjustable-rate mortgages surged to 4.78%, a 21-basis point increase from 4.57% a week earlier.
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