Applications Slip Despite Rate Dip

Mortgage applications fell last week even as rates dipped for the first time in three weeks.

The Mortgage Bankers Association’s weekly survey shows the adjusted Market Composite Index – a measure of mortgage loan application volume – decreased by 1.2%, changing course after last week’s 3.7% increase.

Adjusted purchase applications fell by 2%, while the unadjusted index was down 1% from the week before and 32% lower YOY.

The average interest rate for 30-year fixed loans dipped from 6.55% to 6.50%, 114 bps higher than the same time last year.

“Elevated rates continue to both impact homebuyer affordability and weaken demand for refinancing. Home purchase activity has been very sensitive to rates and local market trends, including the very low supply of existing-home inventory. However, newly constructed homes account for a growing share of inventory, giving more options for prospective buyers,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist.

“The jumbo-conforming spread continues to narrow, an indication that there is reduced lender appetite for jumbo loans following the recent turmoil in the banking sector and heightened concerns about liquidity. The spread was 13 basis points last week, after being as wide as 64 basis points in November 2022.”

Silicon Valley Bank’s collapse sent a shock wave through the economy, leading banks to move more carefully in its wake. Credit availability slipped in March as a result. Jumbo and non-conforming loans are the most impacted by this tightening.

“When banking gets stressed, credit expansion gets tighter and tighter. Non-QM and jumbo loans with certain banks are harder to get from borrowers, as we saw during the first few months of the Covid-19 pandemic too. Non-QM and jumbo loans got impacted, but traditional conventional loans were still flowing,” said Logan Mohtashami, lead analyst at HousingWire.

Refinances saw a boost, however, up 1% from the week prior. They remain 51% lower than the same time last year, comprising only 27.2% of total applications. In the past decade, refis averaged 58% of total activity.


Other key findings include:

-The FHA share of total applications fell from 12.6% to 12.5% with an average interest rate of 6.43%, up slightly.

-The VA share increased to 11.3% from 11.2%, and the USDA share rose from 0.4% to 0.5%.

–ARMs accounted for 7.3% of applications, an increase, and the rates for these loans rose from 5.47% to 5.48%