Demand for mortgage applications in the United States fell by 6.3 percent on a seasonally adjusted basis last week, according to the Mortgage Bankers Association (MBA) survey for the week ending April 1.
The Refinance Index decreased 10 percent from the previous week and was 62 percent lower than the same week one year ago, as the applications for refinancing of home loans dries up.
Rising interest rates and a tighter monetary policy from the Fed continue to push mortgage applications down, as less homeowners benefit from refinancing and more potential homebuyers are priced out.
“Mortgage application volume continues to decline due to rapidly rising mortgage rates, as financial markets expect significantly tighter monetary policy in the coming months,” said Joel Kan, MBA’s associate VP of economic and industry forecasting.
“As higher rates reduce the incentive to refinance, application volume dropped to its lowest level since the spring of 2019,” he said.
Meanwhile, the refinance share of all applications dipped to 38.8 percent, from 40.6 percent the previous week, down from 51 percent a year ago.
The Federal Housing Administration’s (FHA) share of total applications decreased to 9.2 percent from 9.3 percent from the previous week.
Home mortgage application volume for the week witnessed a 3 percent drop, a 9 percent year to year decline from a week ago, while total mortgage application volume fell 41 percent from the same week one year ago.
The 30-year fixed mortgage rate witnessed the fourth consecutive week of increases and is now “more than 1.5 percentage points higher than a year ago,” Kan said.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, which was just 3.36 percent a year ago, increased to 4.9 percent from 4.8 percent, with points decreasing to 0.53 from 0.56 for loans with a 20 percent down payment.
Jumbo loan balances with an average contract interest rate for 30-year fixed-rate mortgages increased to 4.51 percent from 4.4 percent.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA, increased to 4.90 percent from 4.66 percent, with points decreasing to 0.68 from 0.71 for loans with a 20 percent down payment.
Bidding for homes in a shrinking marketplace are now becoming the norm rather than the exception.
“The elevated average purchase loan size and steeper 8 percent drop in FHA purchase applications are both indicative of first-time buyers being disproportionately impacted by supply and affordability challenges” as home listings fall off the market, Kan said.
The strong job market and continuing wage growth is keeping housing demand high, despite a surge in rates and swift home price appreciation.