Loan Applications Increase Due To Interest Rate Drops

Mortgage loan application volume rose 5.5% last week, responding to interest rate dips, the Mortgage Bankers Association’s (MBA) weekly survey reported.

The Market Composite Index, which measures application volume, fell 5.5% on an adjusted basis. The Refinance Index jumped 7% and was 28% lower than a year ago, rebounding from last week’s drop to its lowest level since July 2021.

The seasonally adjusted Purchase Index rose 3%, while the unadjusted Purchase Index rose .1% compared to the week before, down 4% from the previous year.

Interest rates fell to 3.09% after several weeks on the rise, with the 30-year fixed rate falling 14 basis points over the last two weeks. Applications, especially for refinancing, dropped alongside them.

“Although overall activity remains close to January 2020 lows, homeowners acted on the decrease in rates. Refinance activity was up 7% overall, with gains in both conventional and government refinances. Additionally, the average loan balance for a refinance application was the highest in a month,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting.

Low inventory is often blamed for the current housing affordability crisis. Both NAR and the Mortgage Bankers Association maintain that the housing market will remain hot through 2022 due to stock shortages.

Lumber company Weyerhauser’s CEO Devin Stockfish recently told CNBC he expects  “we’re going to have to build a lot of homes here over the next five or 10 years to house the demand level that we have here in the U.S.”

“First and foremost, it all goes back to the level of underbuilding that we’ve been doing in the U.S., really going back to the last Great Recession,” he said.

At the same time, home prices are up 20% year-over-year, while the national median household income has dropped 2.9% to $67,521 from 2019 to 2020.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances fell to 3.16%.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances dropped to 3.26% from 3.34% 

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA fell from 3.29% to 3.18%.