Drop is sign that cutthroat market is weighing down on activity, economist says
Purchase application volume declined for the second consecutive week as interest rates inched up one basis point, according to data from the Mortgage Bankers Association.
MBA’s Market Composite Index dropped 0.9% week over week on a seasonally adjusted basis. The refinance index rose 0.1% from a week ago and was 17% lower than the same period in 2020. Meanwhile, the seasonally adjusted purchase index dipped 3% week over week. Unadjusted, it was down 2% week over week and was 24% higher year over year.
“There was a mixed bag of action in the mortgage market last week. Mortgage rates were slightly higher, refinance applications were essentially unchanged, and purchase applications fell for the second straight week,” said Joel Kan, AVP of economic and industry forecasting at MBA. “Both conventional and government purchase applications declined, but average loan sizes increased for each loan type. This is a sign that the competitive purchase market, driven by low housing inventory and high demand, is pushing prices higher and weighing down on activity. The higher prices are also affecting the mix of activity, with stronger growth in purchase loans with larger-than-average balances.”
The refinance share of mortgage activity grew to 61% of total applications from 60.6% the prior week. The adjustable-rate mortgage (ARM) share of activity increased to 3.9% of total applications. The FHA share decreased six basis points to 10.1% week over week, the VA share decreased three basis points to 11.9%, and the USDA share of total applications remained steady at 0.4%.
“An increase in conventional refinances was offset by a decline in government refinances. The 30-year fixed-rate was up slightly to 3.18%, which is still 22 basis points lower than a year ago, but higher than it was between mid-2020 and February 2021.”
