Mortgage volumes drop by over 10% from the week before

After two weeks of increasing volumes, mortgage activity dipped, with purchases and refinances both falling last week, according to the Mortgage Bankers Association.

The MBA’s Market Composite Index, a measure of weekly loan activity based on surveys of association members, dropped a seasonally adjusted 11% for the period ending May 13, as purchases and refinances both slowed. When compared to the same time period in 2021, last week’s volume came in 56% lower. 

The latest weekly numbers come as the MBA adjusted its originations outlook, reducing its forecast to $2.51 trillion in production this year after coming out with a prediction of $2.58 trillion last month. The pace of new mortgage applications has declined in all but three weeks since early February.

The seasonally adjusted Purchase Index fell 12% from one week earlier, with volumes also down 15% from a year ago, even as elevated mortgage rates declined. Potential homebuyers have been put off by the recent surge in interest rates as well as affordability challenges, according to Joel Kan, MBA’s associate vice president of economic and industry forecasting.

“Furthermore, general uncertainty about the near-term economic outlook, as well as recent stock market volatility, may be causing some households to delay their home search,” Kan said in a press release. 

The Refinance Index also tumbled 10% from seven days earlier, dropping for the ninth time out of the last 10 weeks, as “the current level of rates continues to be a significant disincentive” for refinancing, Kan said. The latest volumes are currently 76% below activity seen during the same weekly period last year.

But despite dropping, refinance volume relative to total loan activity ticked upward compared to the prior week, accounting for 33% of all applications, up from 32.4%. Meanwhile, adjustable-rate loans, which have experienced a noticeable increase in popularity this year, decreased to 10.3% of weekly activity from 10.8%.

New loans fell in average size across all categories after expanding a week earlier. The mean purchase size fell 1.9% to $441,100 from $449,800, while the average refinance amount decreased to $283,000, 6.3% lower than the prior week’s $302,000. The average size of all applications came out to $388,900, 3.2% below $401,900 seven days earlier.

Federally backed loans accounted for a larger share of total volume, as Federal Housing Administration-sponsored activity equaled 11.1% of all new applications, up from 10.5% seven days prior. But the percentage of loans guaranteed through the Department of Veterans Affairs and U.S. Department of Agriculture remained unchanged on a weekly basis at 10.5% and 0.5%, respectively.

Contract interest rates among MBA members all dropped on average week over week, seven days after the 30-year conforming mortgage hit its highest mark since 2009 of 5.53%. The contract average of 30-year mortgages with balances conforming to the Fannie Mae and Freddie Mac loan limit of $647,200 slid last week by 4 basis points to 5.49%. 

The average contract rate for 30-year jumbo loans with balances exceeding the conforming threshold also dropped to 5.03% from 5.08% a week earlier.

The FHA-backed 30-year mortgage contract interest rate averaged 5.32%, a similar weekly decrease of 5 basis points from 5.37%.

Both 15-year and adjustable-rate averages also took a step back after recent upswings. The contract rate average of the 15-year fixed mortgage dropped 6 basis points to 4.73% from 4.79% the previous week, while 5/1 ARMs decreased to 4.42% from 4.47%.