Applications Hit Lowest Level Since 2000

Mortgage loan application volume fell 2.3% last week, reversing a two-week uptick, the Mortgage Bankers Association’s weekly survey shows.

Overall applications dipped to their lowest level since 2000.

The adjusted Market Composite Index, a measure of mortgage loan application volume, decreased by 2.3%. The adjusted purchase index fell 1% while the unadjusted purchase index dropped 2% and was 18% lower YOY.

The refinance index dropped by 5% and made up 31.2% of total applications, down 82% from the same time last year. 

Refinances are at their lowest level since November 2000, pushed down by a 6% decline in conventional refinance applications.

ARM activity fell to 7% of total applications.

“Home purchase applications continued to be held down by rapidly drying up demand, as high mortgage rates, challenging affordability, and a gloomier outlook of the economy kept buyers on the sidelines,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting.

“However, if home price growth slows more significantly and mortgage rates move lower, we might see some purchase activity return later in the year. The 30-year fixed rate stayed more than two percentage points higher than a year ago at 5.45% but was down over 50 basis points from the June 2020 high of 5.98%, providing some relief for buyers in the market.”

Analysts suggest average August rates will stay in the mid-5% range, a departure from June when rates reached 6%.

“Since mid-June, mortgage rates have responded less to inflation data and more to the possibility of an economic downturn or recession. This wouldn’t be unusual, except it was happening as inflation set a fresh 41-year high,” Greg McBride, Chief Financial Analyst for Bankrate, noted in a forecast.

But they may not stay there. Lawrence Yun, Chief Economist for the National Association of Realtors, recently said “it is possible that the 30-year fixed mortgage rate may settle down at 5.5% to 6% for the remainder of the year.”

The FHA share of total applications fell from 12.1% to 12%. The VA share rose to 11.2% from 10.9% of total applications, while the USDA share remained unchanged at 0.6%.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances decreased from 5.47% to 5.45%. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances rose from 5.09% to 5.14%.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased from 5.35% to 5.38%, and for 5/1 ARMs decreased from 4.60% to 4.43%.