Purchase applications increase for the first time in over a month

Mortgage volumes came in flat for a second week, decreasing by a hair, even as purchase activity experienced a rebound, according to the Mortgage Bankers Association.

The MBA’s Market Composite Index, a measure of weekly mortgage volumes based on surveys of association members, edged down a seasonally adjusted 0.1% for the period ending Nov. 4. Although flattening, the index still posted the seventh consecutive drop in activity from the previous survey mark. Compared to the same seven-day time frame a year ago, seasonally adjusted volumes clocked in almost 70% lower. 

But purchases had their first uptick in over a month, with that seasonally adjusted index climbing 1%. However, last week’s pace of activity was still 42% slower from where it stood one year ago.

“Purchase applications increased for the first time after six weeks of declines but remained close to 2015 lows, as homebuyers remained sidelined by higher rates and ongoing economic uncertainty,” said Joel Kan, MBA vice president and deputy chief economist, in a press release.

Meanwhile, the year-long slide in refi volume continued, tempering purchase gains, with the Refinance Index tumbling 4% from the previous week and coming in 87% lower year over year. 

“Refinances continued to fall, with the index hitting its lowest level since August 2000,” Kan said. The share of refinances relative to total application volume also slipped down to 28.1% from 28.6% the prior week. 

The 2022 downturn in borrowing has led to a steady stream of layoffs and closures among lenders and the companies who serve them over the past month, with the MBA seeing a possible reduction of another 25% to 35% in industry headcount. In the past week alone, NewRez and Mr. Cooper have both confirmed layoff announcements, while technology vendor Promontory MortgagePath recently announced it was closing its doors. 

Meanwhile, the share of loans coming from federally sponsored programs decreased by a slim margin, with Federal Housing Administration-guaranteed applications accounting for 13.3% of volume, compared to 13.5% a week earlier. But the share of mortgages sponsored by the Department of Veterans Affairs and U.S. Department of Agriculture were unchanged week over week at 10.3% and 0.5%, respectively. The seasonally adjusted Government Index dropped by 1.3%. 

The average loan size reported on applications last week moved upward, despite ongoing affordability challenges and interest rate hikes. After falling below $400,000 the previous week, the mean purchase size reversed course, rising 1.8% to $403,300 from $395,900. The average refinance amount landed at $277,900, surging 5.7% from $262,800 seven days earlier. The overall average across all new mortgage applications rose 2.8% to $368,100 from $357,900.

Adjustable-rate mortgages saw its share pick back up from seven days earlier, increasing to 12% from 11.8%. Surging interest rates in 2022 have led to renewed interest for ARMs among some borrowers seeking lower initial payments. 

Average rates increased again across most loan types among MBA members, with the 30-year contract fixed rate for loans with conforming balances of $647,200 or less rising to 7.14% from 7.06%. Points for 80% loan-to-value ratio loans also increased to 0.77 from 0.73. The 30-year average sat above 7% for a third straight week, according to Kan.

The average 30-year contract fixed-rate jumbo mortgage with balances above the conforming amount headed the other direction, however, falling 5 basis points to 6.5% from 6.55% a week earlier. Points increased to 0.78 from 0.7.

The contract rate for the FHA-backed 30-year fixed mortgage averaged 6.86%, an increase of 16 basis points from 6.7% the prior week, with points increasing to 1.37 from 1.18.

The contract fixed interest rate for 15-year mortgages rose to an average of 6.4% compared to 6.37% seven days earlier. Points increased to 1.13 from 1.05.

The contract interest rate of 5/1 ARMs also climbed higher, increasing 8 basis points to 5.87% from 5.79% week over week. Points increased to 0.92 from 0.9.