Mortgage Applications Makes Big Move

According to the Mortgage Bankers Association (MBA), mortgage application volume decreased 9% from the prior week ending Jan. 27, 2023. 

Citing the Market Composite Index, which is a measure of mortgage loan application volume, also found on an unadjusted basis from the previous week, the index fell by 6%. The Refinance Index decreased 7% from the previous week and was 80% lower than the same week one year ago. 

The seasonally adjusted Purchase Index decreased 10% from one week earlier. The unadjusted Purchase Index increased 7% compared with the previous week and was 41% lower than the same week one year ago. 

“Mortgage rates declined for the fourth straight week and have now fallen almost 40 basis points over the past month. Treasury yields were higher on average last week, while mortgage rates decreased, which was a sign of a narrowing spread between the two,” said Joel Kan, MBA’s VP and Deputy Chief Economist. “The spread between mortgage rates and the 10-year Treasury has been abnormally wide since early 2022. Further narrowing of that spread is expected to put downward pressure on mortgage rates in the coming months. Overall application activity declined last week despite lower rates, which is an indication of the still volatile time of the year for housing activity. Purchase activity is expected to pick up as the spring homebuying season gets underway, bolstered by lower rates and moderating home-price growth. Both trends will help some buyers regain purchasing power.” 

Other key pieces of data as highlighted by the MBA include: 

  • The refinance share of mortgage activity decreased to 31.2% of total applications from 31.9% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 6.7% of total applications. 
  • The FHA share of total applications increased to 12.0% from 11.9% the week prior. The VA share of total applications decreased to 11.9% from 13.0% the week prior. The USDA share of total applications remained unchanged at 0.6% from the week prior. 
  • The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) decreased to 6.19% from 6.20%, with points decreasing to 0.65 from 0.69 (including the origination fee) for 80% loan-to-value ratio (LTV) loans. The effective rate decreased from last week. 
  • The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $726,200) increased to 5.99% from 5.92%, with points increasing to 0.48 from 0.41 (including the origination fee) for 80% LTV loans. The effective rate increased from last week. 
  • The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 6.18% from 6.22%, with points decreasing to 0.99 from 1.10 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week. 
  • The average contract interest rate for 15-year fixed-rate mortgages decreased to 5.50% from 5.54%, with points increasing to 0.73 from 0.51 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.  
  • The average contract interest rate for 5/1 ARMs decreased to 5.38% from 5.44%, with points remaining at 0.83 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week. 

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