Interest rates for fixed rate mortgage products shot up by at least a dozen basis points during the week ended January 14, still the volume of purchase mortgages rose significantly and, while refinancing declined, it still accounted for the bulk of application activity.
The Mortgage Bankers Association (MBA) reports that its Market Composite Index, a measure of mortgage loan application volume, increased 2.3 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index rose 3 percent.
The Refinance Index did fall 3 percent compared to the week ended January 7 and was 49 percent lower than the same week one year ago. The refinance share of mortgage activity slipped to 60.3 percent of total applications from 64.1 percent the previous week.
The seasonally adjusted Purchase Index jumped by 8 percent from the prior week and was up 14 percent before adjustment. Applications were down 13 percent year-over-year.
“Mortgage rates hit their highest levels since March 2020, leading to the slowest pace of refinance activity in over two years. The 30-year fixed rate reached 3.64 percent and has increased more than 30 basis points over the past two weeks. FHA and VA refinance declines drove most of the refinance slowdown,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Despite the increase in rates, purchase applications jumped almost 8 percent, with conventional purchase applications accounting for much of the stronger activity. The average loan size for a purchase application set a record at $418,500. The continued rise in purchase loan application sizes is driven by high home price appreciation and the lack of housing inventory on the market – especially for entry-level homes. The slower growth in government purchase activity is also contributing to the larger loan balances and suggests that prospective first-time buyers are struggling to find homes to buy in their price range.”
The FHA share of total applications decreased to 9.3 percent from 9.9 percent and the VA share declined to 10.0 percent from 11.4 percent the previous week while the USDA share was unchanged at 0.4 percent. The origination balance of loans rose significantly, from an average of $338,000 a week earlier to $346,800. The balance for purchase mortgages increased to a new record high of $418,500 from $401,700.
The average contract interest rate for 30-year fixed-rate mortgages (FRM) with origination balances at or below the conforming limit of $647,200 increased to 3.64 percent from 3.52 percent. Points were unchanged at 0.45 and the effective rate increased to 3,77 percent.
The average contract interest rate for jumbo 30-year FRM with balances greater than $647,200 increased to 3.54 percent from 3.42 percent. Points rose to 0.47 .from 0.36. The effective rate was 3,67 percent.
Thirty-year FHA-backed FRM saw an average rate of 3.64 percent, 14 basis points higher than the prior week. Points ticked down to 0.44 from 0.45 and the effective rate grew to 3.77 percent.
The average contract interest rate for 15-year fixed-rate mortgages was 2.95 percent with 0.45 point, up from 2.73 percent with 0.35 point. The effective rate was 3,05 percent.
The rate of the average 5/1 adjustable-rate mortgage (ARM) ticked up only 1 basis point during the week, to 3.04 percent. Points rose to 0.24 from 0.20 and the effective rate increased to 3.13 percent. The ARM share of activity jumped from 3.1 percent to 3.8 percent of total applications.
MBA's Weekly Mortgage Applications Survey has been conducted since 1990 and covers over 75 percent of all U.S. retail residential applications Respondents include mortgage bankers, commercial banks, and thrifts. Base period and value for all indexes is March 16, 1990=100 and interest rate information is based on loans with an 80 percent loan-to-value ratio and points that include the origination fee.