Refinance requests fall to lowest level in more than two years

Mortgage activity resumed for the second consecutive week, even as new refinance applications fell to their lowest weekly level in two years, according to the Mortgage Bankers Association.

The Composite MBA Market Index, a measure of loan volume based on a survey of association members, rose 2.3% on a seasonally adjusted basis for the weekly period ending Jan. 14. Compared to the same week of 2021, mortgage activity was 37% lower.

The refinancing index fell 3% week-over-week and stood 49% below its level a year ago. Joel Kan, associate vice president of economic and industry forecasting at the MBA, attributed the recent drop in numbers to rising rates, with the 30-year mortgage jumping more than 30 basis points in two weeks. Fewer government-backed refinances, in particular, contributed to the decline, he said.

The amount of purchases has been high since the beginning of the year, but after refresh until the end of 2021. The seasonally adjusted shopping index was up 8% from the previous seven-day period, but down 12.2% year-on-year. A higher number of conventional applications drove the weekly peak and also leads the average rise to a new high.

“The average loan size for a purchase request set a record high of $418,500,” Kan said. “The continued increase in the size of purchase loan applications is due to strong home price appreciation and a lack of housing inventory in the market, especially for entry-level homes.” The average rose 4.2% from $401,700 the previous week.

“Slower growth in government buying activity is also contributing to higher loan balances and suggests that prospective buyers are struggling to find homes to buy in their price range,” Kan added.

Fewer government refinance requests, however, did not lead to a similar result, as the average refinance loan size edged down 0.9% to $299,500 from $302,300 in the week. former. The average size of all loans for the week climbed 2.6% to $346,800 from 338,000 in the prior period.

The refinancing share of applications also declined, falling to 60.3% from 64.1% of new business. Adjustable rate mortgages jumped to 3.8% of total volume from 3.1% a week earlier.

Reflecting weekly changes in the number of government loans, the share of federally-backed applications relative to overall activity also declined. Federal Housing Administration-sponsored loans fell to 9.3% of overall volume, from 9.9% a week earlier. Mortgages backed by veterans accounted for 10% of new applications, down from 11.4% the previous week, while the share of loans sponsored by the US Department of Agriculture remained at 0.4%.

Interest rates rose across the board, reaching their highest level since March 2020, according to Kan. The contractual interest rate for 30-year fixed mortgages with conforming balances of $647,200 or less averaged 3.64%, down from 3.52% a week earlier.

The average contract rate for the 30-year jumbo fixed-rate mortgage for nonconforming balances also jumped 12 basis points to 3.54% from 3.42% the previous week.

Contractual interest rates for 30-year FHA-backed loans averaged 3.64%, down from 3.5% seven days earlier.

The 15-year fixed rate mortgage also rose, averaging 2.95%, up 22 basis points from 2.73% a week earlier. The 5/1 adjustable rate average rose slightly to 3.04% from 3.03% in the prior weekly period.

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