Mortgage loan application volume dropped 3.3% last week, the Mortgage Bankers Association’s (MBA) weekly survey reports.
The Market Composite Index, which measures application volume, fell 3.3% on an adjusted basis. The Refinance Index fell 4% and was 33% lower than a year ago, beating last week’s drop to its lowest level since January 2020.
The seasonally adjusted Purchase Index fell 2%, while the unadjusted Purchase Index fell 3% compared to the week before, down 9% from the previous year.
“Mortgage rates decreased for the first time since August, as concerns about supply-chain bottlenecks, waning consumer confidence, weaker economic growth, and rising inflation pushed Treasury yields lower. Most of the decline in rates came later in the week, which is likely why refinance applications declined to the lowest level since January 2020, and the overall share of activity fell to the lowest since July 2021,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting.
He noted that the drop in refinances highlights the fact that many homeowners have already refinanced ahead of increasing rates. A CNBC survey of investors found respondents expect the Federal Reserve to raise rates by July 2022.
“Purchase activity continues to be held back by high prices and low for-sale inventory, but current applications levels still point to healthy housing demand. MBA is forecasting for a record $1.6 billion in purchase mortgage originations this year, and sustained demand leading to another record year in 2022,” Kan added.
Homebuyer demand has been increasing rather than stagnating, with Redfin’s Homebuyer Demand Index rising 1.2 points in the week ending October 24 alone.
As a result, homes sales have been closing at break-kneck speeds, bucking the historical trend of the market slowing in the fall. Thirty-three percent of homes sold had an accepted offer within one week of listing, a 30% increase YOY and up 20% from 2019.
“Homes continue to sell quicker and quicker,” said Redfin Chief Economist Daryl Fairweather. “There are still plenty of homebuyers lying in wait who missed out during the Spring frenzy, and they are snatching up homes quickly. Now, those homes are selling for near-record prices. The housing market will likely stay hot until mortgage rates rise substantially.”
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances fell to 3.24%.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances dropped to 3.29% from 3.34%
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased from 3.31% to 3.29%.