Mortgage activity comes in lower for a second straight week

Mortgage activity decreased for the second week in a row, with an uptick in refinances offset by a larger drop in new purchase loans, according to the Mortgage Bankers Association.

The MBA’s Market Composite Index, a measure of weekly loan activity based on surveys of association members, dropped a seasonally adjusted 1.7% for the seven-day period ending July 8. The data included adjustments for the July 4th holiday. The week’s volume was 59% lower compared to one year ago.

The Purchase Index decreased 4% on a seasonally adjusted basis and showed activity 18% below its level from the same week of 2021. Other data released in the past week, including sale cancellations and purchase sentiment, are also pointing to overall sluggishness in the home-buying market.

“Purchase applications for both conventional and government loans continue to be weaker due to the combination of much higher mortgage rates and the worsening economic outlook,” said Joel Kan, MBA associate vice president of economic and industry forecasting, in a press release. The release of June inflation data this week and recession forecasts seem unlikely to ease consumer worries. 

Refinances, though, picked up, rising 2% week over week, driven by increases in both conventional and Federal Housing Administration-backed loans. But the current pace of activity was still 80% below the mark set over the same seven days a year ago. 

“The overall refinance index remained 5% below the average level reported in June,” Kan noted. With interest rates now well above last year’s averages by over two percentage points, “refinance applications are expected to remain depressed.”

Refinances also ended up accounting for a larger share of activity relative to overall volume making up 30.8% of new applications compared to 29.6% a week earlier. Meanwhile, adjustable-rate mortgages increased its share to 9.6% from 9.5%.

The mean loan size increased compared to seven days earlier, rising 1% to $372,700 from $369,100, thanks to growth in the average purchase amount following two weeks of declines. The average loan size of new purchase applications came out to $415,200, 2.5% higher than the prior week’s $405,200. On the other hand, the average size of refinances decreased 2% to $277,300 from $283,200 week over week.

But since hitting record highs in March, purchase loan sizes have been “pulled lower by the potential moderation of home-price growth and weaker purchase activity at the upper end of the market,” Kan said. Various reports across the country show contraction of housing costs and purchase volumes in some of the priciest cities, including San Francisco and New York, with the slowing market leading to waves of layoff announcements in mortgage and real-estate industries. 

The seasonally adjusted Government Index saw a weekly drop of 3%, with the percentage share of federally backed activity also falling. FHA-sponsored applications accounted for 11.7% volume, down from 12% seven days earlier. The share of loans backed by the Department of Veterans Affairs edged up to 11.2% from 11.1%, but mortgages coming via U.S. Department of Agriculture programs fell back to 0.5% from 0.6% week over week. 

Mortgage rate movements among MBA lenders were muted for the most part, at least when  compared to the volatility seen in June, with the average contract fixed-interest rate for 30-year conforming loans with balances of $647,200 or below remaining unchanged week over week at 5.74%.

The contract fixed rate for 30-year jumbo loans above the conforming balance averaged 5.25%, a 3-basis-point drop from the prior week’s 5.28%. 

The average contract rate for 30-year FHA-backed home loans decreased by 11 basis points to 5.49% after coming in at 5.6% seven days earlier.

Similarly, the 15-year fixed-rate mortgage average inched downward to 4.93% from 4.96% the previous week.

The 5/1 adjustable-rate mortgage average bucked the trend by increasing to 4.71% from 4.62% the prior week.