Refinance apps are 80% below their 2021 level

Mortgage activity edged up by a fraction over the holiday week, as refinances increased but now sit at just one-fifth of their volume from last year, according to the Mortgage Bankers Association.

The MBA’s Market Composite Index, a measure of weekly application volume based on surveys of association members, inched up 0.7% on a seasonally adjusted basis for the seven-day period ending June 24. The data included adjustments for the Juneteenth holiday. 

The Refinance Index climbed 2% from the prior week due to some interest rate moderation, according to Joel Kan, MBA associate vice president of economic and industry forecasting. But the 2022 rate surge continues to make a noticeable impact on the market.

“The decline in mortgage rates led to a slight increase in refinancing, driven by an uptick in conventional loans. However, refinances are still 80% lower than a year ago and more than 60% below the historical average,” Kan said in a press release.

Fannie Mae, in its weekly Refinance Application-Level Index, also reported the dollar volume of activity down 72% year over year based on data obtained via its automated Desktop Underwriter system.

The seasonally adjusted MBA Purchase Index also eked out a 0.1% gain week over week after larger upward moves earlier in June. But purchases are 49% lower compared to the same week a year ago.

“Purchase applications were essentially flat last week but were supported by a 6% increase in government loans,” said Kan.

In addition to increasing by volume, the refinance share relative to total new application activity climbed to 30.3% from 29.7% one week prior. Adjustable-rate mortgages accounted for 10.1% of total applications, down from 10.6% seven days earlier. 

Average loan sizes fell across all categories after rising one week earlier, with the mean amount for all activity dropping 3% to $371,000 from $382,800. The average refinance amount decreased 5.8% to $273,300 from $290,000 week over week. 

“The average purchase loan amount declined to $413,500, which is an ongoing downward trend since it hit a record $460,000 in March 2022,” Kan said. A week ago, the mean purchase amount was $422,100.

Thanks to the uptick in federally backed purchase loans, the seasonally adjusted Government Index also increased last week. Government activity grabbed a larger share of total volume as well.

Federal Housing Administration-backed mortgages took a 12% share of applications, the same proportion as the previous week, but Department of Veterans Affairs-sponsored applications increased its share to 11.2%, up from 10.7% seven days earlier. Loans backed by the U.S. Department of Agriculture inched up to 0.6% from 0.5% the prior week. 

“Mortgage rates continue to experience large swings,” Kan said, with 30-year conforming and jumbo rates among MBA lenders both sliding downward following surges of more than 20-basis points each a week earlier. 

“Rates are still significantly higher than they were a year ago, when the 30-year fixed rate was at 3.2%,” he added. 

The average contract interest rate for 30-year fixed conforming loans with balances of $647,200 or below came in at 5.84%, dropping 14 basis points from 5.98% the previous week. 

The 30-year jumbo-loan contract fixed rate for mortgages above the conforming balance fell to an average of 5.42% from 5.49% week over week.

The 30-year contract fixed rate for mortgages backed by the FHA was unchanged from seven days earlier, remaining at 5.62%. 

The average contract rate of the 15-year fixed mortgage also came in flat, inching up by a single basis point to 5.06% from 5.05%.

The contract interest rate for 5/1 adjustable-rate mortgages averaged 4.64% falling from 4.78% a week earlier.