Loan Applications Fall Again As Rates Exceed 5%

Mortgage loan application volume fell another 1.3% 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 1.3%. The adjusted purchase index rose by 1%, while the unadjusted purchase index rose by 2% and was 6% lower YOY.

The refinance index fell 5% and was down 62% YOY. Refinances made up 37.1% of total applications, down from 38.8%.

The 30-year fixed-rate hit 5.13%, the highest since November 2018, resulting in refis falling to their slowest weekly pace since 2019.

“Higher rates are increasing borrower interest in ARMs. Their share of applications last week was at 7.4%, which was the highest share since June 2019,”  said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting

“The jump in mortgage rates will slow the housing market and further reduce refinance demand the rest of this year,” said Mike Fratantoni, MBA’s Senior Vice President and Chief Economist. “Higher home prices and rates as well as ongoing supply constraints are now expected to lead to an annual decline in existing home sales. However, MBA continues to expect purchase originations to reach a new record in 2022.”

“Total origination volume is now expected to be at $2.56 trillion this year – down from roughly $4 trillion in 2021,” he added.

Mortgage lender layoffs are making headlines as companies scramble to account for slowing business. Companies that hired brokers at a breakneck pace last year are finding they can’t shuffle everyone to different departments and are forced to downsize.

“With rates moving higher, capacity is going to be adjusted across the entire industry,”  Jeff DerGurahian, chief capital markets officer at LoanDepot Inc., told Bloomberg.

The FHA share of total applications increased to 9.5%. The VA share of total applications rose to 9.9%, 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 4.90% to 5.13%. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances rose from 4.51% to 4.68%.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA rose from 4.90% to 4.95%.