Mortgage loan application volume ticked down again, the sixth straight week of declines, according to the Mortgage Bankers Association’s weekly survey.
The adjusted Market Composite Index, a measure of mortgage loan application volume, dropped by a mild 0.5% as mortgage rates cooled off, dropping to 7.06%.
The adjusted purchase index fell 1%, while the unadjusted purchase index decreased by 2% and was 41% lower YOY.
“Apart from the ARM loan rate, rates for all other loan types were more than three percentage points higher than they were a year ago. These elevated rates continue to put pressure on both purchase and refinance activity and have added to the ongoing affordability challenges impacting the broader housing market, as seen in the deteriorating trends in housing starts and home sales,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist.
“With most homeowners locked into significantly lower rates, refinance applications continued to run more than 80% below last year’s pace, while the refinance share of applications was 28.6%– the fifth straight week below 30%.”
Homeowners who are refinancing now despite high rates may be struggling with their finances as a recession approaches.
“It’s people that are consolidating and using their mortgages to lower overall debt costs but that’s not going to make sense for the average person that’s holding a 2.75% mortgage now from well over a year ago,” Tim Pagliara, Chief Investment Officer at CapWealth, told Yahoo Finance.
That borrower believes “it’s still cheaper to borrow against your home than it is to have an 8% car loan.”
Borrowers with mortgages that are about to end may also refinance to extend their loan term but pay less month-to-month.
“Homeowners with shorter duration mortgages could be refinancing for longer duration to pay less, so again, it frees up some cash without perhaps removing equity,” Richard de Chazal, macro analyst at William Blair & Company, said.
The survey shows that the refinance index rose by 0.2% and was 85% lower than at the same time last year.
Refis made up 28.6% of total applications.
The ARM share of activity fell from 12.7% of total applications– just under its highest share since March 2008– to 11.8%.
The FHA share of total applications dipped from 13.9% to 13.5%, with an average interest rate of 6.70%.
The VA share fell from 10.7% to 10.3%, while the USDA share remained unchanged at 0.5%.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances dropped from 7.16% to 7.06%.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances rose from 6.53% to 6.55%, and for 5/1 ARMs decreased from 5.86% to 5.79%.
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