MBA Weekly Survey Apr. 19, 2023: Rising Rates Dampen Applications

Mortgage applications fell for the second time in three weeks as rising interest rates curtailed activity, the Mortgage Bankers Association reported Wednesday in its Weekly Mortgage Applications Survey for the week ending April 14. 

The Market Composite Index fell by 8.8 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased by 8 percent from the previous week. 

The unadjusted Refinance Index decreased by 6 percent from the previous week and was 56 percent lower than the same week one year ago. The refinance share of mortgage activity increased to 27.6 percent of total applications from 27.0 percent the previous week.

The seasonally adjusted Purchase Index decreased by 10 percent from one week earlier. The unadjusted Purchase Index decreased by 9 percent from the previous week and was 36 percent lower than the same week one year ago.

The FHA share of total applications increased to 12.7 percent from 12.3 percent the week prior. The VA share of total applications decreased to 11.7 percent from 12.8 percent the week prior. The USDA share of total applications remained unchanged at 0.5 percent from the week prior.

“Last week’s increase in mortgage rates prompted a pullback in application activity,” said Joel Kan, MBA Vice President and Deputy Chief Economist. “With more first-time homebuyers in the market, we continue to see increased sensitivity to rate changes. The 30-year fixed rate increased 13 basis points to 6.43 percent, which led to purchase applications declining 10 percent.”

Kan said affordability challenges persist. “There is limited for-sale inventory in many markets across the country, so buyers remain selective on when they act,” he said. “The 10-percent drop in FHA purchase applications, and the increase in the average purchase loan size to its highest level in a month, are other indications that first-time buyers have pulled back. The spread between the jumbo and conforming 30-year fixed rates widened slightly last week to 15 basis points, but this was a much tighter spread compared to the past year. As banks reduce their willingness to hold jumbo loans, we expect this narrowing trend to continue.”

Kan noted refinances also declined and accounted for just over a quarter of all applications, as rates remained more than a full percentage point above the same week a year ago. “This leaves very little refinance incentive for most homeowners,” he said.

MBA reported the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased to 6.43 percent from 6.30 percent, with points increasing to 0.63 from 0.55 (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 $726,200) increased to 6.28 percent from 6.26 percent, with points increasing to 0.51 from 0.42 (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 6.33 percent from 6.29 percent, with points increasing to 0.94 from 0.91 (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 5.89 percent from 5.78 percent, with points increasing to 0.65 from 0.57 (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 5.56 percent from 5.51 percent, with points decreasing to 0.72 from 0.90 (including origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The ARM share of activity increased to 6.3 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.