Loan Apps Tank By 11% After Slight Increase Last Week

After ticking up 2% last week, mortgage loan application volume tanked by 11% last week, the Mortgage Bankers Association’s (MBA) weekly survey shows.

The adjusted Market Composite Index, a measure of mortgage loan application volume, fell by 11%. The adjusted purchase index fell by 12%, while the unadjusted purchase index fell by 12% as well and was 15% lower YOY.

The refinance index fell 10% and was down 76% YOY. Refinances made up 33% of total applications, up from 32.4%. 

“Mortgage applications decreased for the first time in three weeks, as mortgage rates – despite declining last week – remained over two percentage points higher than a year ago and close to the highest levels since 2009. For borrowers looking to refinance, the current level of rates continues to be a significant disincentive,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. 

“Purchase applications fell 12% last week, as prospective homebuyers have been put off by higher rates and worsening affordability conditions. Furthermore, general uncertainty about the near-term economic outlook, as well as recent stock market volatility, may be causing some households to delay their home search.”

High rates and worsening affordability may have a “stabilizing” effect on the housing market as competition lessens. Redfin reported its agents recently saw the lowest competition against their offers since March 2021.

At the same time, First American’s Potential Home Sales Model showed the market is still hot but beginning to show signs of normalcy.

“The frenzy of the pandemic-era housing market appears to be the historical exception, not the rule. Recency bias may have many believing that mortgage rates below 4 percent is normal, but it is anything but normal from a historical perspective,” said FirstAm Chief Economist Mark Fleming.

“As higher mortgage rates slow the housing market from its 150-mile-per-hour pace to something more in the line with its historical speed limit, sellers’ market conditions should ease, and home buyers will benefit from a not-so-new normal.”

The FHA share of total applications jumped back up to 11.1% from 10.5%. The VA and USDA share of total applications stayed steady at 10.5% and 0.5%, respectively.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances decreased from 5.53% to 5.49%. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances also fell from 5.08% to 5.03%.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA fell from 5.37% to 5.32%, and for 5/1 ARMs it decreased to 4.42% from 4.47%.