Applications Slip As Rates Rise To 7.07%

Mortgage applications fell for a second consecutive week as rates moved up again.

The Mortgage Bankers Association’s weekly survey shows that the adjusted Market Composite Index — a measure of mortgage loan application volume — fell by 5.2%, adding to last week’s 5.7% dip. These results include an adjustment for Memorial Day.

Adjusted purchase applications declined by 4%, while the unadjusted index was down 16% and 13% lower YOY.

“Mortgage rates moved slightly higher last week, with the 30-year conforming rate reaching 7.07%– its highest level since early May – despite incoming data indicating somewhat slower economic growth,” said Mike Fratantoni, MBA’s SVP and Chief Economist.

“Government purchase volume was down less, helped by growth in VA applications. The market is relying on first-time homebuyer demand, and many first-time buyers do use government lending programs.”

First-time buyers are particularly impacted by the high price, high rate environment. They lack equity to transfer into a new home sale, and many Americans say they struggle to save for a down payment while inflation and rents are elevated.

Programs like UWM’s Zero-Down offering give first-timers a cheaper way to break into homeownership. However, they have side downsides, too. In Zero-Down’s case, homeowners start off with no equity, so if the market cools and prices fall, those homeowners could come up short.

Patricia McCoy, a Boston College Law School professor, told Benzinga that Zero Down reminds her of the subprime mortgage crisis and warned that proper risk management is necessary to keep history from repeating itself.

Refinances, which had seen bigger demand over the last month, were down 7% from the week prior but 5% higher than the same time last year. They accounted for 31.1% of applications, a decline.