Mortgage loan application volume dropped 2.7% from the week ending December 31, the Mortgage Bankers Association’s (MBA) weekly survey reported.
MBA adjusted the results to account for the holidays. The adjusted Market Composite Index, a measure of mortgage loan application volume, fell 2.7%. The adjusted purchase index fell 4%, while the unadjusted purchase index fell 32% and was 12% lower YOY.
The refinance index fell 2% and was down 40% YOY. Refinances made up 65.4% of total applications.
The survey attributed the drop in refinances to an increase in the 30-year fixed rate, which rose to 3.33%, its highest point since April.
“The higher rates to close 2021 caused refinance activity to decrease 2.2%. Refinance demand continues to dwindle, as many borrowers refinanced in 2020, and in early 2021 – when mortgage rates were around 40 basis points lower,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting.
“The purchase market also finished the year on a slower note, with the final week coming in at the weakest since October 2021. Even though average loan sizes were lower, home-price appreciation remains at very high levels.”
The average purchase loan reached its second-highest amount on record in December 2021, $416,200. But the industry is betting on home price appreciation slowing in 2022, giving potential buyers some breathing room after a year of skyrocketing prices. In its latest Home Price Index Report, CoreLogic predicted home prices will grow by only 2.8% through next November.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances rose from 3.31% to 3.33%. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances fell from 3.35% to 3.31%.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA rose to 3.40% from 3.39%.