Mortgage activity falls to its lowest point since 2000

The dip in mortgage activity hit another milestone last week, with volumes now at lows not seen in 22 years, according to the Mortgage Bankers Association.

The MBA’s Market Composite Index, a measure of weekly loan volumes based on surveys of association members, dropped a seasonally adjusted 6.3% for the period ending July 15. The index fell for the third consecutive week, and compared to the same seven-day period last year, came in nearly 60% lower, as both purchases and refinances declined.

The Purchase Index dropped 7% on a seasonally adjusted basis from one week earlier. Compared to the same weekly period last year, purchase volumes were 19% lower.

“Purchase activity declined for both conventional and government loans, as the weakening economic outlook, high inflation and persistent affordability challenges are impacting buyer demand,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting, in a press release. 

The Refinance Index decreased 4% week over week, with loan volume now 80% below the level of one year ago. Like the composite index, refinance numbers also fell, according to Kan.

“With most mortgage rates more than 2 percentage points higher than a year ago, demand for refinances continues to plummet, with MBA’s refinance index also falling to a 22-year low,” he said. 

Despite the drop in the index, the share of refinance loans relative to overall weekly volume edged up higher, accounting for 31.4% of activity compared to 30.8% seven days earlier.

Adjustable-rate mortgages, though, made up a smaller portion, falling to 9.5% from 9.6%.

The decline in volumes after a record 2021 has led to a steady wave of mortgage layoffs at both depository banks and nonbanks this year. In recent bank earnings calls, industry executives have explicitly mentioned the likelihood of more to come. After dramatic declines in profits among originations units at many companies in the first three months this year, many are paying close attention to upcoming second-quarter numbers for signals about what may lie ahead. 

Slowing demand, combined with interest rate hikes, has contributed to contractions in home prices as well. After seeing an uptick the previous week, the average loan size of new purchase applications headed downward by 2% to $406,600 from $415,200 seven days earlier. The mean refinance amount also came in lower, equaling $276,500, just a fraction below the prior week’s $277,300. The average for all volume was $365,800, approximately 2% below $372,700 the previous week.

The share of federally backed activity remained relatively flat week over week. Federal Housing Administration-insured applications increased their share to 12.4% from 11.7%, but the increase was largely offset by a decline in the number of loans that the Department of Veterans Affairs guarantees. VA applications made up 10.6% of volume, down from 11.2% the prior week. The share of loans coming through U.S. Department of Agriculture programs inched up to 0.6% from 0.5%.  

Mortgage rate averages among MBA lenders continued to exhibit the see-saw action seen throughout much of the summer. After sitting at 5.74% for two weeks running, the 30-year fixed-rate average for loans with conforming balances of $647,200 or less headed back upward, increasing to 5.82%.

After dropping last week to 5.25%, the contract fixed rate average for 30-year jumbo loans above the conforming balance swung up to 5.31%.

The average contract rate for 30-year FHA-backed home loans inched up by a single basis point to 5.5% after it had fallen to 5.49% seven days earlier.

While 30-year rates increased, the average contract rate of the 15-year fixed mortgage dropped 5 basis points to 4.88% from 4.93% week over week. 

The 5/1 adjustable-rate mortgage average also decreased from the prior week, falling to 4.6%, after it had climbed to 4.71% seven days earlier.