Mortgage loan application volume rose by just 0.3% last week, the Mortgage Bankers Association’s (MBA) weekly survey reports.
The Market Composite Index, which measures application volume, rose 0.3% on an adjusted basis. The Refinance Index fell 2% and was 26% lower than a year ago. It’s the Refinance Index’s lowest level since January 2020.
The seasonally adjusted Purchase Index rose 4%, while the unadjusted Purchase Index rose 3% compared to the week before, down 9% from the previous year.
“Mortgage rates increased again last week, as the 30-year fixed rate reached 3.30% and the 15-year fixed rate rose to 2.59%- the highest for both in eight months. The increase in rates triggered the fifth straight decrease in refinance activity to the slowest weekly pace since January 2020. Higher rates continue to reduce borrowers’ incentive to refinance,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting.
Meanwhile, some financial observers say these trends are precisely why people considering a refinance should do so.
“If you haven’t yet refinanced, do so now,” says Greg McBride, chief financial analyst for Bankrate. “The likelihood is that we see higher rates, not lower rates in the months ahead.”
The MBA report also notes that home sale activity is still strong. “Purchase applications picked up slightly, and the average loan size rose to its highest level in three weeks, as growth in the higher price segments continues to dominate purchase activity. Both new and existing-home sales last month were at their strongest sales pace since early 2021, but first-time homebuyers are accounting for a declining share of activity. Home prices are still growing at a rapid clip, even if monthly growth rates are showing signs of moderation, and this is constraining sales in many markets, and particularly for first-timers.”
The share of first-time buyers has fallen from 46% in 2018 to 37% in 2021. Older buyers who can tap their equity have an advantage in a competitive market where homes are selling above their list price.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances rose to 3.3%.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances increased to 3.34% from 3.22%
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased from 3.17% to 3.31%.