Mortgage volumes fall back to late-2018 levels: MBA

Mortgage activity continued its 2022 slowdown last week, as a decrease in both purchases and refinances led to the most subdued pace in years. 

The Mortgage Bankers Association’s Market Composite Index, which measures weekly application volumes through surveys of MBA members, dropped a seasonally adjusted 2.3% from the previous seven days for the period ending May 27. Mortgage applications decreased to its lowest level since December 2018, according to Joel Kan, MBA’s associate vice president of economic and industry forecasting. Compared to the same week last year, volumes were 54% lower.  

The Purchase Index declined a seasonally adjusted 1% week over week and came in 14% lower than one year ago, “as the purchase market continues to struggle with supply and affordability challenges,” Kan said in a press release. But high-priced properties are still garnering interest, he noted. 

“Demand is high at the upper end of the market, and supply and affordability challenges are not as detrimental to these borrowers as they are to first-time buyers,” Kan said.

The Refinance Index fell another 5% week over week, despite interest rates retreating downward. The pace of refinances plunged as interest rates rose swiftly in the late winter and early spring and has come in lower in 11 of the last 12 weeks. 

“The refinance market continues to shrink, led by larger decreases last week for FHA and VA refinance applications,” Kan said. “The Refinance Index was 75% below last year’s level, when rates were more than 200 basis points lower.”

The share of refinances relative to overall application volume also slipped to 31.5% from 32.3% one week prior. Adjustable-rate mortgages, which have experienced an industry resurgence this year as borrowers look for savings, accounted for 8.7% of all new loans, down from 9.4% a week earlier. 

The interest in more expensive properties helped drive average loan sizes higher after two consecutive weeks of decreases, with the mean purchase amount inching up to $433,200 compared to $432,000 seven days prior, a boost of 0.3%. Average refinance sizes also edged higher by 0.7% to $282,100 from $280,100 a week earlier. The average size for all new mortgage activity last week rose to $385,600 from $383,000, up 0.7%.

Government-sponsored loan activity came in lower on both a volume and share basis, with the Government Index dropping a seasonally adjusted 6%, due primarily to the refinance slowdown. Federal Housing Administration-backed applications accounted for a 10.8% share relative to overall volume, down from 11.3% the previous week. Department of Veterans Affairs-backed loans took 10.2% of volume compared to 10.4% a week earlier, while the share of applications coming via the U.S. Department of Agriculture remained unchanged at 0.5%.

Average mortgage rates among MBA members dropped across all categories tracked by the association, with the 30-year conforming rate falling for the fourth time in five weeks. 

“Concerns of weaker economic growth and the recent stock market sell-off drove Treasury yields lower,” Kan said. Treasury yields typically correspond to movements of interest rates.

The average contract rate for 30-year mortgages with balances conforming to the Fannie Mae and Freddie Mac loan limit of $647,200 dropped 13 basis points to 5.33% from 5.46% a week earlier. 

The contract rate average for 30-year jumbo loans with balances exceeding $647,200 fell below the 5% mark, dipping 9 basis points to 4.93% from 5.02% the week prior.

The average contract rate for FHA-backed 30-year mortgages decreased to 5.2% compared to 5.36% the previous week. 

The contract 15-year fixed-rate average slid down 13 basis points to 4.59% from 4.72% seven days earlier.

After rising last week, the 5/1 adjustable-rate mortgage average fell 3 basis points to 4.46% from 4.49%.