Residential Real Estate News
Higher Mortgage Rates Slow U.S. Mortgage Originations and Refinances
According to the Mortgage Bankers Association's latest Weekly Mortgage Applications Survey for the week ending April 8, 2022, U.S. mortgage applications decreased 1.3 percent from one week earlier.
The Market Composite Index, a measure of mortgage loan application volume, decreased 1.3 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 1 percent compared with the previous week.
The Refinance Index decreased 5 percent from the previous week and was 62 percent lower than the same week one year ago. The seasonally adjusted Purchase Index increased 1 percent from one week earlier. The unadjusted Purchase Index increased 2 percent compared with the previous week and was 6 percent lower than the same week one year ago.
"Mortgage rates across all loan types continued to move higher, with the 30-year fixed rate exceeding the 5-percent mark to 5.13 percent - the highest since November 2018. Refinance activity as a result declined to the slowest weekly pace since 2019," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "Higher rates are increasing borrower interest in ARMs. Their share of applications last week was at 7.4 percent, which was the highest share since June 2019. In a promising sign of strong purchase demand amidst affordability challenges, both conventional and government purchase applications increased."
Given the faster than expected increase in mortgage rates, and the likelihood of more aggressive actions from the Federal Reserve to curb inflation, MBA's April 2022 forecast now calls for mortgage originations to total $2.58 trillion in 2022 - a 35.5 percent decline from 2021. Purchase originations are still forecasted to reach a record $1.72 trillion this year - a 4 percent increase from 2021. Refinance originations are now expected to fall 64 percent to $841 billion.
"Mortgage rates have spiked more than 1.5 percentage points thus far in 2022. This rapid increase in rates, caused by a much more rapid pace of rate hikes and balance sheet reduction from the Federal Reserve, is in response to the booming job market and inflation being at a 40-year high. The jump in mortgage rates will slow the housing market and further reduce refinance demand the rest of this year," said Mike Fratantoni, MBA's Senior Vice President and Chief Economist. "Higher home prices and rates as well as ongoing supply constraints are now expected to lead to an annual decline in existing home sales. However, MBA continues to expect purchase originations to reach a new record in 2022. Even though existing sales volume will be slightly lower than last year, the continued growth in new home sales and the rapid rise in home prices should deliver a smaller, but solid, 4 percent annual growth in purchase origination volume."
Added Fratantoni, "Total origination volume is now expected to be at $2.58 trillion this year - down from roughly $4 trillion in 2021."
The refinance share of mortgage activity decreased to 37.1 percent of total applications from 38.8 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 7.4 percent of total applications.
The FHA share of total applications increased to 9.5 percent from 9.2 percent the week prior. The VA share of total applications increased to 9.9 percent from 9.8 percent the week prior. The USDA share of total applications remained unchanged at 0.5 percent from the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 5.13 percent from 4.90 percent, with points increasing to 0.63 from 0.53 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate increased from last week.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $647,200) increased to 4.68 percent from 4.51 percent, with points increasing to 0.37 from 0.34 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 4.95 percent from 4.90 percent, with points increasing to 0.75 from 0.68 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The average contract interest rate for 15-year fixed-rate mortgages increased to 4.34 percent from 4.11 percent, with points increasing to 0.65 from 0.53 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The average contract interest rate for 5/1 ARMs increased to 4.06 percent from 3.82 percent, with points increasing to 0.68 from 0.46 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
