Mortgage volume ekes out small weekly gain

An increase in purchase applications contributed to an uptick in mortgage volume last week, even as interest rates hit their highest in eight months, according to the Mortgage Bankers Association.

The MBA’s Market Composite Index, a measure of mortgage activity based on a survey of members, edged up a seasonally adjusted 0.3% from the prior week for the period ending Oct. 22. Unadjusted, the index increased 0.2%. Compared to the same week one year ago, seasonally adjusted activity came in 20% lower.

Steadily rising interest rates brought refinances to their slowest pace of activity since January 2020, which led to a fifth consecutive weekly decrease for these applications, said Joel Kan, MBA’s associate vice president of economic and industry forecasting. The Refinance Index registered a 2% week-over-week drop, with volumes 26% below numbers from the same seven-day period in 2020. “Higher rates continue to reduce borrowers’ incentive to refinance,” Kan noted in a press statement.

Elevated purchase activity offset that dip, with the seasonally adjusted index posting a 4% increase from one week earlier. On an unadjusted basis, purchases climbed 3%, but were 9% below its level from the same week in 2020.

“Purchase applications picked up slightly, and the average loan size rose to its highest level in three weeks, as growth in the higher-price segments continues to dominate purchase activity,” said Kan. New purchase loan amounts averaged $409,500 for the week, an uptick of 0.4% from the previous average of $407,900.

“Home prices are still growing at a rapid clip, even if monthly growth rates are showing signs of moderation, and this is constraining sales in many markets, and particularly for first-timers,” Kan added. Even though new and existing-home sales experienced its briskest pace of activity in September since early this year, first-time buyers, who are often at a disadvantage in current bidding wars, are accounting for a declining share of purchases.

While the average purchase-loan size grew, the mean refinance-mortgage size shrank for the second straight week, dropping 1.2% to $289,200 from $292,800. Overall, the average amount of new mortgage applications was for $334,600, inching down 0.1% from $335,000 the previous week.

Refinances accounted for a smaller share of weekly activity, falling to 62.2% of volume compared to 63.3% seven days earlier. Adjustable-rate mortgages also took in a decreased share, falling to 3.1% from 3.3% the prior week.

Government-sponsored programs increased their portion of applications relative to total volume by a slight degree, despite the rise in housing prices. Federal Housing Administration-sponsored loans grew to 10.4% of volume, up from 10.2% a week earlier. Veterans Affairs-backed mortgages accounted for 10.6% of all applications, compared to 10.4% the prior week, while the percentage of loans applied for through the U.S. Department of Agriculture remained unchanged at 0.5%.

Fixed interest rates keep climbing
According to the MBA, both the 30-year conforming and 15-year rates reached their highest point in eight months.

• The average contract interest rate for 30-year fixed-rate mortgages with conforming balances of $548,250 or less increased seven basis points to 3.3% compared to 3.23% a week earlier. 

• The average 30-year jumbo fixed-rate mortgage with balances of greater than $548,250 also jumped, hitting 3.34%, up from 3.26% the prior week. 

• The 30-year fixed rate for loans backed by the FHA climbed 14 basis points to an average of 3.31% after it had fallen to 3.17% in the previous period. 

• The 15-year fixed-rate mortgage average rose five basis points to 2.59% from 2.54% seven days earlier.

• While fixed-term rate averages all headed upward, the 5/1 adjustable rate average went in the opposite direction, falling 20 basis points to 2.89% from 3.09% the previous week.