Mortgage loan application volume plummeted by 8.1% last week, the Mortgage Bankers Association’s (MBA) weekly survey shows.
The adjusted Market Composite Index, a measure of mortgage loan application volume, dropped by 8.1%%. The adjusted purchase index fell 2%, while the unadjusted purchase index fell 1% and was 12% lower YOY.
The refinance index fell a whopping 14% and was down 54% YOY. Refinances made up 44.8% of total applications.
Mortgage interest rates jumped by 23 basis points last week, their largest weekly increase since March 2020, due to the Fed’s interest rate hike and the expectation of fewer MBS purchases, Mike Fratantoni, MBA’s Senior Vice President and Chief Economist, noted.
“With mortgage rates now at 4.5%, compared to rates at or below 3% not that long ago, it is no surprise that refinance volume has dropped by more than 50% compared to this time last year,” Fratantoni said.
“Purchase application volume was down slightly for the week, with a larger drop in FHA and VA purchase volume, and a small decline in conventional purchase loans. First-time homebuyers, who rely on these government programs, are increasingly challenged by both the rapid increase in home prices and higher mortgage rates. Repeat homebuyers, who are more likely to use conventional loans, benefit from the gains in home equity realized on a sale which can be used to fuel their next purchase, even with rates moving higher.”
With stock shortages driving prices up, homeowners gained $2.6 trillion in tappable equity in 2021, up by 35% year-over-year for an aggregate total of almost $10 trillion.
“Home price appreciation over the course of 2021 was unlike anything that’s come before, and the incredible growth we’ve seen in homeowner equity is testament to that fact,” said Black Knight Data & Analytics President Ben Graboske.
While current homeowners benefitted, first-time buyers looking for an affordable home are exhausted and burnt out from the struggle. More than 40% of first-time homebuyers have been looking for more than a year.
The FHA share of total applications increased to 8.8%. The VA share of total applications fell to 9.8% from 10.5%, while the USDA share of total applications fell to 0.4% from 0.5%.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances rose from 4.27% to 4.50%. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances rose from 4.02% to 4.11%.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA rose from 4.23% to 4.40%.