The fixed rate rise is to blame
Last week saw the mortgage market index falling to its lowest level in 22 years as mortgage applications dropped 6.5% on a seasonally adjusted basis, according to the Mortgage Bankers Association’s (MBA) weekly survey.
Left unadjusted, mortgage applications have decreased by 17% compared to the previous week.
Joel Kan, associate vice president of economic and industry forecasting at the MBA, said the low volume of refinance and purchase applications had dragged the market index to a 22-year low after the 30-year fixed rate increased to 5.4% – the first rate rise after three consecutive declines.
“While rates were still lower than they were four weeks ago, they remained high enough to still suppress refinance activity. Only government refinances saw a slight increase last week,” Kan said. “The purchase market has suffered from persistently low housing inventory and the jump in mortgage rates over the past two months. These worsening affordability challenges have been particularly hard on prospective first-time buyers.”
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Refinance and purchase applications were 6% and 7% lower than the previous week, respectively. Both percentages are significantly lower compared to the same time last year. Meanwhile, the adjustable-rate mortgage share sank to 8.2% of total applications.
Not all rates have seen lower percentages, however. The refinance share of mortgage activity noted an increase from 31.5% to 32.2%, the FHA share from 10.8% to 11.3% and the VA share from 10.2% to 11.4% this week.
Only the USDA share of total applications remained relatively unchanged at 0.5% from the previous week.
