Mortgage activity increased slightly last week, despite refinances diminishing amid rising interest rates.
The Mortgage Bankers Association’s Market Composite Index, which tracks loan applications based on a survey of MBA members, ticked up a seasonally adjusted 0.2% for the week ending Oct. 8, reversing course after
“An increase in home purchase applications offset a slight decline in refinances,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting, in a press statement. “The increase in purchase applications was welcome news, but was primarily driven by a 2% gain in conventional purchase applications, which kept the average loan size elevated.”
Both the seasonally adjusted and unadjusted Purchase Index increased by 2% from the previous week, but seasonally adjusted volume was 10% below levels in the same week of 2020.
While purchases rose, refinances fell 1% from a week earlier, helping drive down the composite index. Refinances came in 16% lower from numbers recorded in the same weekly period last year, according to the MBA. An 8-basis-point weekly increase in the average interest rate for Federal Housing Administration loans led to dampened enthusiasm for government-backed refinances, which fell by 3%, Kan said. “We continue to expect weakening refinance activity as rates move higher and borrowers see less of a rate incentive.”
In the last month, refinances fell by 11% as interest rates went up. Meanwhile, the share of refinances relative to loan activity also decreased for the second consecutive weekly period, accounting for 63.9% of mortgage volume. A week earlier, they made up 64.5% of applications.
Adjustable-rate mortgages took a 3.4% share of the total volume, unchanged from the prior week.
As interest rates trended upward, the share of federally backed applications dropped across the board, with FHA-backed loans slipping to a 10.2% share of volume from 10.5% the prior week. Veterans Affairs-backed loans also accounted for 10.2% of mortgages, down from 10.3% a week earlier, and the percentage of loans taken through U.S. Department of Agriculture programs fell to 0.4% from 0.5%.
Overall average loan size increased slightly on a week-over-week basis, as conventional applications outpaced government-sponsored activity. The average amount of all new mortgage loans climbed 0.7% to $341,400 from $338,900. The mean size of refinance loans also jumped to $303,100 from $299,400, a 1.2% uptick. But the average amount on new purchase applications declined slightly by 0.3% to $409,300 from $410,500. Home prices remain high, as
Interest rates up in all categories
The average contract interest rate on a 30-year fixed mortgage with
The 30-year fixed rate for jumbo mortgages greater than $548,250 posted a two-basis-point rise, now standing at 3.22% compared to 3.2% a week earlier.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA jumped to 3.2% from 3.12% week over week, increasing eight basis points.
The average contract interest rate for 15-year fixed-rate mortgages ticked up to 2.48%, up from 2.45% in the last weekly period.
The 5/1 adjustable-rate mortgage also spiked, jumping 54 basis points to 3.08% from 2.54% the previous week.