Mortgage activity swings upward after two weeks of declines

Mortgage activity picked up for the first time in three weeks, despite high interest rates and mixed economic signals, the Mortgage Bankers Association said. 

The MBA’s Market Composite Index, a measure of weekly loan applications based on surveys of the association’s members, increased a seasonally adjusted 3.2% for the seven-day period ending Dec. 9. 

“Overall applications increased, driven by increases in purchase and refinance activity,” said Joel Kan, MBA’s vice president and deputy chief economist, in a press release.

“However, with rates more than three percentage points higher than a year ago, both purchase and refinance applications are still well behind last year’s pace.” The weekly volume came in 64% lower compared to the same time frame in 2021. 

The seasonally adjusted Purchase Index rose 4% week over week, reversing course from a previous decline. But it was 39% under its level over the same period last year. A less competitive market combined with recent rate moves has opened a window of opportunity for some who had previously dropped out of the home buying process, according to Kan.    

“The ongoing moderation in home-price growth, along with further declines in mortgage rates, may encourage more buyers to return to the market in the coming months,” Kan said.

The Refinance Index increased for the second straight week, climbing 3%, but seven-day volumes were 85% below levels of a year ago. The refinance share relative to total activity also increased to 29.4% of applications from 28.7%.

Arriving alongside the uptick in new applications, though, were larger loan sizes. The average amount recorded on mortgage applications last week jumped 3.7% to $364,400 from $351,000 in the previous reporting period. The mean refinance amount also surged 5.6% to $275,500 from $261,000. Meanwhile, the average purchase loan size crossed back above the $400,000 threshold after tumbling to its lowest reading in almost two years one week prior, increasing 3.6% to $401,400 from $387,300.

While the number of new government-backed applications picked up in tandem with the full composite index, they accounted for a smaller share of overall volume last week. Loans guaranteed by the Federal Housing Administration made up 13.1% of new applications, falling from 13.7% week over week, but Department of Veterans Affairs-backed mortgages inched up a notch to 11.5% from 11.4%. The slice of applications guaranteed by the U.S. Department of Agriculture remained the same at 0.6%.

With interest rates moderating since late October, the share of adjustable-rate mortgage activity has likewise slipped compared to earlier in the fall, but last week saw a small increase of ARMs relative to total volume, rising to 7.7% from 7.6%. 

At the same time volumes increased, though, fixed interest rates also rose among MBA lenders after trending downward for weeks, as financial markets factored in mixed signals regarding inflation and the Federal Reserve’s potential moves, according to Kan. November’s Consumer Price Index was released after the survey period, and any immediate developments related to the data or this week’s Fed meeting are not reflected. 

The contract average for 30-year conforming mortgages with balances of $647,200 or less edged up to 6.42% from 6.41% the prior week. Points increased to 0.64 from 0.63 for 80% loan-to-value ratio loans. 

The 30-year contract average for jumbo loans greater than the conforming amount jumped 6 basis points to 6.14% compared to 6.08% seven days earlier. Points decreased to 0.42 from 0.5.

The contract average of 30-year fixed FHA-backed mortgages also inched up by a single basis point to 6.4% from 6.39% the previous week, with points increasing to 1.03 from 0.93.

Meanwhile, the 15-year fixed contract interest rate headed up 8 basis points to an average of 5.92%. One week earlier, it came in at 5.84%. Points decreased to 0.54 from 0.55.

The contract interest rate average for 5/1 ARMs slid to 5.58% from 5.59% the prior week, with points decreasing to 0.8 from 0.91 for 80% LTV mortgages.