Applications Plummet As Rates Hit Highest Point Since 2010

Mortgage loan application volume plummeted by 5% 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 5%. The adjusted purchase index fell by 3%, while the unadjusted purchase index fell by 2% and was 14% lower YOY.

The refinance index fell 8% and was down 68% YOY. Refinances made up 35.7% of total applications, down from 37.1%. Mortgage rates reached 5.20%, the highest level since 2010.

“Ongoing concerns about rapid inflation and tighter US monetary policy continued to push Treasury yields higher, driving mortgage rates to their highest level in over a decade,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. 

“The 30-year rate has increased 70 basis points over the past month and is 2 full percentage points higher than a year ago. The recent surge in mortgage rates has shut most borrowers out of rate/term refinances, causing the refinance index to fall for the sixth consecutive week. In a housing market facing affordability challenges and low inventory, higher rates are causing a pullback or delay in home purchase demand as well. Home purchase activity has been volatile in recent weeks and has yet to see the typical pick up for this time of the year.”

Home sellers may be equally wary of putting their homes on the market. Redfin reported that 51% of homeowners currently have a rate under 4%, and might be reluctant to sell and find a new home that will increase their monthly payments.

This may be contributing to the stock shortage, which is keeping competition and home price appreciation high.

Kan added that the ARM share of applications jumped to 8.5%– its highest level since 2019– because they tend to have lower rates. Borrowers already dealing with high home prices are finding them more attractive.

The FHA share of total applications increased to 9.9%. The VA share of total applications rose to 10.1%, while the USDA share of total applications remained unchanged at 0.5%.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances rose from 5.13% to 5.20%. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances rose from 4.68% to 4.76%.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA rose from 4.95% to 5.11%