Mortgage loan application volume dropped 4% last week, overwhelming a 2% increase from the week prior, the Mortgage Bankers Association’s (MBA) weekly survey reported.
The seasonally adjusted Market Composite Index, a measure of mortgage loan application volume, rose 4%. The seasonally adjusted purchase index rose 1%, while the unadjusted purchase index fell 4% and was 9% lower YOY.
The refinance index fell 6% and was down 41% YOY. Refinances made up 63.3% of total applications.
The report noted that refinances fell even though rates remained steady week to week. Interest rates are 40 basis points higher year-over-year, however, in line with the 41% drop in refinances from the same period in 2020.
“Fewer homeowners have a strong incentive to refinance at current rates,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting.
“Purchase activity increased slightly, as a 1.7% rise in conventional applications offset a 1.6% decline in applications for government loans. The strength in conventional purchase activity continues to support higher loan balances, which moved back over $400,000. Housing demand remains strong as the year comes to an end amidst tight inventory and steep home-price growth.”
Soaring home prices have prompted concerns about the economic futures of Millennials entering their 30s, prime homebuying age. Millennials spend more of their monthly income on homeownership costs than other generations and are at the greatest risk of becoming house-rich and cash-poor.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances remained unchanged at 3.30%. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances fell from 3.33% to 3.32%.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA rose from 3.35% to 3.37%.