Compound share

Refinances account for smallest share of mortgage applications since 2019

Mortgage activity slowed for the second week in a row as refinances continued to decline and the size of purchases increased in the face of rising rates and tighter credit, the Mortgage Bankers Association said.

The Composite MBA Market Index, which tracks loan volumes and rates based on surveys of association members, fell a seasonally adjusted 5.4% for the weekly period ending Feb. 11. Compared to the same seven-day period in 2021, seasonally adjusted total activity was 40% lower.

Higher rates continue to dampen interest from potential borrowers, especially for refinances, with the documented 30-year average among MBA members making the biggest weekly jump in nearly two years, said Joel Kan, vice-president. Associate Chairman of MBA Economic and Industrial Forecasting.

“Consistent with this period of higher mortgage rates, refinance applications fell 9% last week,” Kan said in a news release. Compared to activity a year ago, refinance numbers are down 54% and also down 15% since the last week of 2021. Refinance share of weekly activity relative to overall volume has also fell to 52.8%, its lowest level since July 2019.

The Buys Index was also down, albeit less sharply, by 1% on a seasonally adjusted basis from the previous week and down 7% from the same period a year ago.

“Purchase requests saw a slight decline over the week, with government purchase requests accounting for most of the decline,” Kan said. Loans guaranteed by the government represented only 21.7% of the total volume of purchases.

“Potential buyers still face high sale prices on top of higher mortgage rates,” Kan added.

Due to the lower percentage of loans guaranteed by the federal government, the average size of new purchase requests increased for the sixth week in a row. The average purchase loan amount rose 1.3% to $453,000 and set a new record for the fifth consecutive week. A week earlier, the average had risen to $446,900.

However, the average loan size for refinances edged down 0.9% to $300,600 from $303,400 the previous week. The average loan amount for all new applications was $372,600, up 1.7% week-over-week from $366,200.

According to MBA analysis, purchase loan amounts increased in early 2022 even as mortgage credit has become more difficult to obtain of late. The association also reported this week that its Mortgage Credit Availability Index, or MCAI, fell 0.9% in January, a sign of tightening standards. Index values ​​are determined by an analysis of ICE Mortgage Technology data.

“Credit availability fell to its lowest level since August 2021, even as the economy and labor market continued to improve,” Kan said, adding further concerns for potential homebuyers in addition. current prices and rates. Conventional MCAI fell 2.5% from December, but government MCAI edged up 0.7%.

Within the conventional index, the availability of conforming mortgage credit decreased by 4.2% and jumbo by 1.6%. Compliant credit supply fell to its lowest level since 2013, due to dwindling investor appetite for loan programs aimed at borrowers with higher loan-to-value ratios and lower credit ratings . Jumbo credit reversed direction, retreating for the first time after six straight months of gains.

“This growth streak ended last month as investors reduced their willingness to buy jumbo loans and also increased credit requirements,” Kan said.

In the MBA’s weekly survey, the share of adjustable-rate mortgages rose to 5% of total mortgage activity, from 4.5% the previous week. But the overall share of government applications declined, with the government index also showing a drop in new loan activity.

The share of new mortgages backed by the Federal Housing Administration rose to 8.3% from 8% a week ago, but loans backed by the Department of Veterans Affairs fell to 9.3% of volume from 10% seven days ago. earlier. The share of apps sponsored by the US Department of Agriculture remained at 0.4%.

Mortgage rates rose in all major categories for the second week in a row, with the 30-year consistent average recording its largest one-week increase since March 2020, the MBA said. The average rate for loans with conforming balances of $647,200 or less rose from 3.83% to 4.05%, an increase of 22 basis points. The MBA rate crossed the 4% threshold for the first time since 2019.

The contractual average of 30-year fixed-rate jumbo loans exceeding the conforming balance also made a similar sharp rise to 3.81% from 3.62% a week earlier.

Average 30-year FHA-backed mortgage rates also crossed the 4% threshold, rising to 4.01% from 3.93% in the prior period.

The 15-year fixed mortgage rate averaged 3.37%, up 21 basis points from 3.16% week-on-week, while the 5-year variable rate mortgage /1 averaged 3.36% from 3.13% seven days earlier.