May Slump: Mortgage Applications Down Again
Mortgage applications fell again last week as borrowers recoil in the face of rising rates.
The Mortgage Bankers Association’s weekly survey shows the adjusted Market Composite Index – a measure of mortgage loan application volume – decreased by 4.6%, adding to last week’s drag.
Adjusted purchase applications fell by 4%, while the unadjusted index was down 5% from the week before and 30% lower YOY.
The average interest rate for 30-year fixed loans rose from 6.57% to 6.69%, the highest level since March.
“Since rates have been so volatile and for-sale inventory still scarce, we have yet to see sustained growth in purchase applications. Refinance activity remains limited, with the refinance index falling to its lowest level in two months and more than 40% below last year’s pace,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist.
Refinances fell 5% from the week prior. They remain 44% lower than the same time last year, comprising only 27.4% of total applications. In the past decade, refis averaged 58% of total activity.
“Investors remained attuned to the uncertainty around the U.S. debt ceiling and communication from several Federal Reserve officials last week, which sent Treasury yields higher, along with mortgage rates. Economic data released over the past week have also pointed to a still-resilient economy,” Kan added.
Treasury yields rose at the beginning of this week as investors continue to pay close attention to debt ceiling negotiations. The 10-year Treasury was up almost 3 bps to 3.721%, while 2-year Treasury yields were up around 4 bps to 4.328%.
The U.S. could theoretically default on its debt as soon as June 1 if no deal is reached, according to Treasury Secretary Janet Yellen.
“With an additional week of information now available, I am writing to note that we estimate that it is highly likely that Treasury will no longer be able to satisfy all of the government’s obligations if Congress has not acted to raise or suspend the debt limit by early June, and potentially as early as June 1,” she wrote in a warning letter this week.
In addition, investors are awaiting minutes from May’s FOMC meeting to see where the Fed is leaning with rate hikes.
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