Mortgage loan application volume fell last week as mortgage rates topped 6% for the first time since 2008, nearly doubling year over year.
The Mortgage Bankers Association’s weekly survey shows that the adjusted Market Composite Index, a measure of mortgage loan application volume, decreased by 1.2%. The adjusted purchase index rose 0.2%, while the unadjusted purchase index dropped 12% and was 29% lower YOY.
The refinance index dropped by 4% and was 83% lower than the same time last year. Refis made up 30.2% of total applications.
“Higher mortgage rates have pushed refinance activity down more than 80 percent from last year and have contributed to more homebuyers staying on the sidelines. Government loans, which tend to be favored by first-time buyers, bucked this trend and increased over the week, driven mainly by VA and USDA lending activity,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting.
“The spread between the conforming 30-year fixed mortgage rate and both ARM and jumbo loans remained wide last week, at 118 and 45 basis points, respectively. The wide spread underscores the volatility in capital markets due to uncertainty about the Fed’s next policy moves.”
“After next week’s rate hike, we’re going to start playing a dangerous game with the state of the economy. The next rate hike is going to be only the second time in 40 years that the Fed funds rate is going to exceed the prior peak in a rate hiking cycle,” investor Peter Boockvar told CNBC.
“We’re getting into treacherous waters.”
Investor Logan Kane announced on Seeking Alpha that the housing market “looks set to implode.”
The FHA share of total applications rose from 13.3% to 13.4%. The VA share increased to 11.3% from 10.8% of total applications, and the USDA share rose from 0.6% to 0.7%.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances increased from 5.94% to 6.01%.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances rose from 5.46% to 5.56%.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased from 5.61% to 5.71%, and for 5/1 ARMs rose from 4.81% to 4.83%.
ARM activity rose to 9.1% of total applications.