But there's one piece of "promising news" in today's report, chief economist says
Fewer borrowers applied for a mortgage last week as the steady increase in interest rates reduces their incentives to refinance or purchase a home.
Mortgage loan application volume fell by 6.8% on a seasonally adjusted basis from the week before, according to data from the Mortgage Bankers Association released today.
“Mortgage rates jumped to their highest level in more than three years last week, as investors continue to price in the impact of a more restrictive monetary policy from the Federal Reserve,” said MBA chief economist Mike Fratantoni. “Not surprisingly, refinance application volume declined further, as fewer borrowers have an incentive to apply at rates that are significantly higher than a year ago.”
Fratantoni noted that refi application volume is now 60% below last year’s levels, consistent with MBA’s forecast for 2022.
Refi applications plunged 15% from the previous week, while purchase applications increased 1% week over week. Consequently, the refinance share of mortgage activity was down from 44.8% to 40.6% of total applications.
“Even with the ongoing climb in rates, purchase application volumes were little changed last week. This is particularly auspicious, as we are now at the beginning of the spring homebuying season, and 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” Fratantoni said.
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“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 contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) rose from 4.50% to 4.80% week over week.
