MBA Expects Refinancing to Remain Depressed

By: Jann Swanson •

Mortgage application activity declined last week, again due, partially at least, to a holiday shortened business week. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of loan application volume, declined 1.7 percent on a seasonally adjusted basis from one week earlier, including an adjustment to account for the Independence Day holiday. Application volume was down 13 percent on an unadjusted basis.

The Refinance Index increased 2 percent from the previous week but was 80 percent lower than the same week one year ago. The refinance share of mortgage activity increased to 30.8 percent of total applications from 29.6 percent the previous week.

The Purchase Index was down 4 percent with seasonal adjustment and was 14 percent lower before adjustment compared to the previous week. The Index was down 18 percent from its level during the same week in 2021.

“Mortgage rates were mostly unchanged, but applications declined for the second straight week,” according to Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Purchase applications for both conventional and government loans continue to be weaker due to the combination of much higher mortgage rates and the worsening economic outlook.

“After reaching a record $460,000 in March 2022, the average purchase loan size was $415,000 last week, pulled lower by the potential moderation of home-price growth and weaker purchase activity at the upper end of the market.” 

Added Kan, “Refinance applications increased slightly last week, driven by an uptick in conventional and FHA refinances. The overall refinance index remained 5 percent below the average level reported in June. With the 30-year fixed rate 265 basis points higher than a year ago, refinance applications are expected to remain depressed.”

Other highlights from MBA’s Weekly Mortgage Applications Survey.

  • The FHA share of total applications decreased to 11.7 percent from 12.0 percent the week prior while the VA share increased to 11.2 percent from 11.1 percent. USDA applications ticked down to an 0.5 percent share, 0.1 point lower than the prior week.
  • While loan sizes have been slipping lower for the last five months, they did rise slightly last week. The overall loan grew from $369,100 to $372,700 and the $415,200 average for home purchases was $10,000 higher than the previous week.
  • The average contract interest rate for 30-year fixed-rate mortgages (FRM) with conforming loan balances remained at 5.74 percent, with points decreasing to 0.59 from 0.65.
  • The rate for 30-year FRM with balances higher than the conforming rate ticked down to 5.25 percent from 5.28 percent, with points decreasing to 0.38 from 0.44.
  • Thirty-year FRM with FHA backing had an average rate of 5.49 percent with 1.08 point. The prior rate was 5.60 percent with 0.89 point.
  • The average contract interest rate for 5/1 adjustable-rate mortgages (ARMs) increased to 9 basis points to 4.71 percent, with points increasing to 0.77 from 0.72.  
  • The ARM share of activity increased to 9.6 percent of total applications, up 0.1 point from a week earlier.