Purchases increase slightly to start spring season

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Mortgage activity slowed for the third week in a row, brought down by refinance numbers, which continued their decline. Purchases, meanwhile, held steady even in the face of interest rate increases.

The Mortgage Bankers Association Market Composite Index, a measure of loan activity based on surveys of MBA members, dropped a seasonally adjusted 6.8% for the weekly period ending March 25. Compared to the same week a year ago, volumes were 42% lower, seasonally adjusted.

The Refinance Index fell 15% from the previous week, as fewer borrowers had incentive to apply at rates that are averaging significantly higher than a year ago, said to Mike Fratantoni, MBA’s senior vice president and chief economist. “Refinance application volume is now 60% below last year’s levels, in line with MBA’s forecast for 2022,” he said in a press release.

The Purchase Index, though, registered a slight weekly uptick, despite higher rates and ongoing accelerated price growth, inching 1% higher on a seasonally adjusted basis compared to the previous seven days. Volumes were 10% lower than the same week a year ago.

The pace of purchase activity as spring buying season commenced was “particularly auspicious“ in the current rate and price environment, Fratantoni said.

“Those shopping for homes are struggling with not only higher and more volatile mortgage rates, but also an ongoing shortage of homes on the market,” he said. “Given these hurdles, it appears to be promising news that purchase-application volume has not declined, as many potential buyers are likely feeling the squeeze in their purchasing power from the jump in rates.”

The average size of new purchase loans also retreated after setting a record high seven days earlier, making a 1.6% drop to $452,900 from $460,100. The mean refinance size also dipped by 1.8%, falling to $292,900 from $298,200. But the average size for all new loans remained virtually unchanged, rising by only a fraction to $387,900 from $387,500 a week earlier.

With refinance activity falling, its share of applications relative to overall volume decreased for the fifth straight reporting period, accounting for 40.6% of applications, down from 44.8% a week earlier. Adjustable-rate mortgage applications grabbed a slightly larger share, rising to 6.6% from 6.4% week over week.

The seasonally adjusted Government Index fell 7%, but the share of federally backed activity relative to overall volume increased slightly compared to the prior seven-day period. Federal Housing Administration-sponsored applications accounted for 9.3% of volume, up from 8.8%, while loans backed by the Department of Veterans Affairs took a 9.5% share compared to 9.8% a week earlier. Meanwhile, applications coming via the U.S Department of Agriculture increased to an 0.5% share, rising from 0.4%.

Interest rates among MBA members reached their highest levels in over three years last week, Fratantoni said. Fixed-rate averages tracked by the association all came in above 4% after jumping by double-digit percentage points.

The average contract rate for 30-year fixed mortgages with conforming balances of $647,200 or less rose 30 basis points to 4.8% from 4.5% a week earlier.

The average contract interest rate for 30-year jumbo loans with balances above the conforming limit took an almost similar-sized jump to 4.4%, up from 4.11% the prior week.

The contract interest rate for the 30-year fixed mortgage backed by the FHA averaged 4.66%, 26 basis points higher from 4.4% a week earlier.

The contract rate for the 15-year fixed mortgage passed the 4% threshold to average 4.01%, up from 3.76% seven days prior.

The 5/1 adjustable-rate mortgage also saw a significant surge, with its average coming in at 3.7%, up 31 basis points from 3.39% week over week.


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