Mortgage loan application volume reversed course after five straight weeks of decreases, rising 6.6% last week, the Mortgage Bankers Association’s (MBA) weekly survey shows.
The adjusted Market Composite Index, a measure of mortgage loan application volume, increased by 6.6%. The adjusted purchase index rose 8%, while the unadjusted purchase index was up by 18% and was 16% lower YOY.
The refinance index rose 4% and was down 76% YOY and made up 31.7% of total applications.
ARM activity fell to 8.1% of total applications.
Joel Kan, MBA Association Vice President of Economic and Industry, noted that applications rose despite an interest rate explosion last week. The 30-year fixed-rate hit 5.65% last week, up 25 basis points and the highest level since 2008.
“Mortgage rates followed Treasury yields up in response to higher-than-expected inflation and anticipation that the Federal Reserve will need to raise rates at a faster pace. Despite the increase in rates, application activity rebounded following the Memorial Day holiday week but remained 0.29% below pre-holiday levels. With mortgage rates well above 5%, refinance activity continues to run more than 70% lower than last year,” Kan said.
“Purchase applications were down more than 15% compared to last year, as ongoing inventory shortages and affordability challenges have cooled demand, coinciding with the rapid jump in mortgage rates.”
The affordability crisis is impacting buyers across the country. In Q4 2021, median-priced single-family homes were less affordable in 77% of U.S. counties analyzed by ATTOM Data Solutions, a 13-year high. This is a dramatic increase from Q4 2020 when only 39% of counties were less affordable than in the past.
“The average wage earner can still afford the typical home across the United States, but the financial comfort zone continues shrinking as home prices keep soaring and mortgage rates tick upward,” said Todd Teta, chief product officer with ATTOM.
While the market is cooling slightly, demand is expected to remain elevated in 2022. Danielle Hale, a Chief Economist for Realtor.com, recently told Forbes that home sales are expected to increase another 6.6% and home prices to rise another 2.9% on top of 2021 highs.
The FHA share of total applications rose from 11.3% to 11.8%. The VA share of total applications rose to 11.7% from 11.4%, while the USDA share rose to 0.6%.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances increased to 5.65% from 5.40%. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances rose to 5.25% from 4.99%.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA rose from 5.30% to 5.36%, and for 5/1 ARMs increased from 4.51% to 4.57%.