MBA Weekly Applications Survey Jan. 19, 2022: Higher Rates Keep Borrowers Hopping

For the second straight week, rising mortgage interest rates sent home buyers scurrying for mortgage applications, the Mortgage Bankers Association reported Wednesday in its Weekly Mortgage Applications Survey for the week ending January 14. 

The Market Composite Index increased by 2.3 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased by 3 percent from the previous week. 

The unadjusted Refinance Index decreased by 3 percent from the previous week and was 49 percent lower than the same week one year ago. The refinance share of mortgage activity decreased to 60.3 percent of total applications from 64.1 percent the previous week.

The seasonally adjusted Purchase Index increased by 8 percent from one week earlier. The unadjusted Purchase Index increased 14 percent from the previous week and was 13 percent lower than the same week one year ago.

The FHA share of total applications decreased to 9.3 percent from 9.9 percent the week prior. The VA share of total applications decreased to 10.0 percent from 11.4 percent the week prior. The USDA share of total applications remained unchanged from 0.4 percent the week prior.

“Mortgage rates hit their highest levels since March 2020, leading to the slowest pace of refinance activity in over two years,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “The 30-year fixed rate reached 3.64 percent and has increased more than 30 basis points over the past two weeks. FHA and VA refinance declines drove most of the refinance slowdown.”

Kan said the higher interest rates motivated purchase applicants to lock in. “Despite the increase in rates, purchase applications jumped almost 8 percent, with conventional purchase applications accounting for much of the stronger activity,” he said. “The average loan size for a purchase application set a record at $418,500. The continued rise in purchase loan application sizes is driven by high home price appreciation and the lack of housing inventory on the market – especially for entry-level homes. The slower growth in government purchase activity is also contributing to the larger loan balances and suggests that prospective first-time buyers are struggling to find homes to buy in their price range.”

MBA reported the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 3.64 percent from 3.52 percent, with points unchanged at 0.45 (including origination fee) for 80 percent loan-to-value ratio loans. The effective rate increased from last week.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $647,200) increased to 3.54 percent from 3.42 percent, with points increasing to 0.47 from 0.36 (including origination fee) for 80 percent LTV loans. The effective rate increased from last week.

The average contract interest rate for 30-year fixed-rate mortgages backed by FHA increased to 3.64 percent from 3.50 percent, with points decreasing to 0.44 from 0.45 (including origination fee) for 80 percent LTV loans. The effective rate increased from last week.

The average contract interest rate for 15-year fixed-rate mortgages increased to 2.95 percent from 2.73 percent, with points increasing to 0.43 from 0.35 (including origination fee) for 80 percent LTV loans. The effective rate increased from last week.

The average contract interest rate for 5/1 adjustable-rate mortgages increased to 3.04 percent from 3.03 percent, with points increasing to 0.24 from 0.20 (including origination fee) for 80 percent LTV loans.  The effective rate increased from last week.

The ARM share of activity increased to 3.8 percent of total applications.

The survey covers more than 75 percent of all U.S. retail and consumer direct residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts.