Mortgage activity slowed last week, as higher interest rates left buyers sidelined, according to the Mortgage Bankers Association.
The MBA's seasonally adjusted Market Composite Index, a weekly measure of loan application volumes based on surveys of association members fell 5.7% from the prior seven-day survey period. The decline continues a spring trend of regular fluctuations in the number of incoming applications. One week earlier, the index had climbed up by 6.3%. On a year-over-basis last week's activity fell 32.8%.
"Mortgage application activity slowed, as most mortgage rates in the survey increased, with the 30-year fixed rate jumping 9 basis points to its highest level in two months at 6.57%," said Joel Kan, MBA vice president and deputy chief economist, in a press release.
One week prior, the average 30-year conforming rate came in at 6.48%. Meanwhile, points used for the 30-year conforming mortgage with balances below $726,200 remained at 0.61 for 80% loan-to-value transactions.
The average contract rate of the 30-year jumbo mortgage with balances exceeding the conforming amount also headed up 13 basis points, rising to 6.46% from 6.33% seven days earlier. Points decreased to 0.38 from 0.51 for 80% LTV loans.
"Mortgage rates increased last week even as Treasury yields were essentially flat, with the spread between the two rates widening to 310 basis points," he said. A wider spread may point to broad concerns among investors regarding future volatility, possibly related to a potential government debt default.
Kan recently pointed out the highly rate-sensitive nature of mortgage borrowers today, particularly among consumers looking to purchase. Rate increases helped drive the Purchase Index down 4.8% on a seasonally adjusted basis from the last survey to its lowest level in a month, Kan said. Compared to the same week in 2022, purchases came in 26.5% lower.
"Buyers remain wary of this rate volatility," he said, but also added that "for-sale inventory in many parts of the country remains scarce," leaving them with fewer purchase opportunities. Researchers across the housing industry are similarly noting the impact of short supply on business volume, as well as the availability of mortgage credit.
The Refinance Index, meanwhile, fell even more sharply, coming in 7.7% lower week over week. Volumes declined 43.4% from the same seven-day period a year ago, when interest rates were still well under 6%.
"Most borrowers have lower rates on their mortgages, and those who are in the market are extremely rate sensitive," Kan said.
Refinances accounted for 27.4% of total volume, slipping from 28% a week earlier. Adjustable-rate mortgages, which typically see greater uptake as rates head higher, bucked the trend, with a 6.5% share compared to 6.8% in the prior weekly survey.
As refinance activity shrunk, so did the average amount reported on new applications. The mean size of refinances fell almost 6% to $261,300 from $277,900. But the average purchase-loan amount was virtually unchanged, coming in at $440,400 compared to $440,700 the previous week.
Across all applications, the average amount applied for was $391,300, a 0.9% decrease from one week earlier.
Federally backed loans took a larger step back than the composite market, with the seasonally adjusted Government Index falling by 8.9% from the previous survey period. The share of government-sponsored activity, likewise, dipped relative to overall activity.
While Federal Housing Administration-guaranteed applications slipped back to a 12% slice of activity from 12.1% a week earlier, loans backed by the Department of Veterans Affairs took a bigger tumble, landing at a 12.2% share from 12.9%. Mortgage applications coming from U.S. Department of Agriculture programs took the same 0.4% piece week over week.
FHA-backed mortgages saw the only decrease in home loan rates tracked by the MBA. The average contract rate inched down 2 basis points to 6.39% from 6.41% a week earlier among MBA lenders. Points used by borrowers also decreased to an average of 0.97 from 1.01 for 80% loan-to-value ratio loans.
The average 15-year contract rate managed to stay under the 6% mark, but still rose 5 basis points from the prior survey to 5.96% from 5.91%. Points increased to 0.68 from 0.58.
Meanwhile, the 5/1 ARM saw its average rate leap 36 basis points to 5.71% from 5.35% seven days earlier. Borrowers drove points used up to 1.1 from 0.79. This particular type of adjustable-rate mortgage stays fixed for half a decade before becoming variable based on market conditions.
