Mortgage purchase demand increased last week but that doesn’t signal a change in the mortgage market.
The Mortgage Bankers Association’s weekly survey shows the adjusted Market Composite Index – a measure of mortgage loan application volume – rose by 7.4%, balancing out last week’s 5.4% dip.
The average interest rate for 30-year fixed loans rose from 6.71% to 6.79%. Rates have jumped by 50 basis points just in the last month, driving applications down.
Adjusted purchase applications increased by 7%, while the unadjusted index was up 9% from the week before and was 42% lower YOY.
But MBA Vice President and Deputy Chief Economist noted that the bump was the result of purchase applications resettling after sinking in weeks prior, not a harbinger of better days.
“Even with higher rates, there was an uptick in applications last week, but this was in comparison to two weeks of declines to very low levels, including a holiday week. Comparing the application indices from a year ago, purchase applications were still down 42 percent, and refinance activity was down 76 percent. Many borrowers are waiting on the sidelines for rates to come back down,” Kan said.
“Mortgage rates continued to increase last week. The 30-year fixed rate rose to 6.79% – the highest level since November 2022 and 270 basis points higher than a year ago.”
Rates will likely go even higher depending on economic data to be released this week.
Fed Chairman Jerome Powell has laid out an “aggressive” plan to bring the U.S.’s sticky inflation down.
“The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated,” Powell said. “If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.”
He added that no official decision had been made.
Experts say the implication is that the central bank may raise rates by a half-point later this month. There will be a meeting on March 21 and 22.
Refinances were up 9% from the week prior and 76% lower than the same time last year, comprising only 28.9% of total applications.
In the past decade, refis averaged 58% of total activity.
The share of ARM activity rose for another week after seeing declines when rates were closer to 6%. ARMs accounted for 8.6% of applications. Rates for these loans saw a boost from 5.73% to 5.75%.
Other key findings include:
-The FHA share of total applications rose to 12.8%, with an average interest rate of 6.56%, up from 6.45%.
-The VA share increased to 12% from 11.6%, and the USDA share remained unchanged at 0.5%.
-The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances increased to 6.49% from 6.44%.
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— The Mortgage Note (@TheMortgageNote) March 7, 2023
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