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Mortgage App Volume Slides to Close 2021

According to the Mortgage Bankers Association (MBA), mortgage applications decreased 2.7% from two weeks prior for the week ending December 31, 2021.

The holiday adjusted Refinance Index decreased 2% from the two weeks ago, and was 40% lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 4% from two weeks earlier. The unadjusted Purchase Index decreased 32% compared with the two weeks ago and was 12% lower than the same week one year ago.

While the Index changes were calculated relative to two weeks prior, the following compositional and rate measures are presented relative to the previous week only.

"Mortgage rates continued to creep higher over the past two weeks, as markets maintained an optimistic view of the economy. The 30-year fixed rate increased six basis points to 3.33%—the highest since April 2021. The higher rates to close 2021 caused refinance activity to decrease 2.2%. Refinance demand continues to dwindle, as many borrowers refinanced in 2020, and in early 2021—when mortgage rates were around 40 basis points lower," said Joel Kan, MBA's Associate VP of Economic and Industry Forecasting. "The purchase market also finished the year on a slower note, with the final week coming in at the weakest since October 2021. Even though average loan sizes were lower, home-price appreciation remains at very high levels."

CoreLogic recently released its Home Price Index (HPI) and HPI Forecast for November 2021, finding that nationally, home prices increased 18.1% in November 2021, compared to November 2020. On a month-over-month basis, home prices increased by 1.3% compared to October 2021.

"Over the past year, we have seen one of the most robust seller's markets in a generation,” said Frank Martell, President and CEO of CoreLogic. “While increased interest rates may help cool down homebuying activity, we expect 2022 to be another strong year with continuing upward price growth."

The nation’s tight supply remained a hurdle for prospective buyers, as affordability and economic factors amidst the latest Omicron variant have impeded the decision-making process for many. A new study from Redfin has found that 73% of home buyers and potential home sellers note that inflation is impacting their future home buying or selling plans.

As the year concluded, Freddie Mac found the 30-year fixed-rate mortgage (FRM) dipping 0.07 points to 3.05% from 3.12% a week prior.

This slight dip in rates, after weeks on the rise, drove the refinance share of mortgage activity up to 65.4% of total applications from 63.9% the previous week.

Many jumped in and took advantage of record-low rates as they remained near the 3% mark to close out 2022.

"Despite supply and affordability challenges, 2021 was a record year for purchase originations,” said Kan. “MBA expects 2022 to be even stronger, with total purchase activity reaching $1.74 trillion."

By loan type, the FHA share of total applications increased to 9.2% from 8.5% the week prior. The VA share of total applications decreased to 11.3% from 11.4% the week prior. The USDA share of total applications remained unchanged from 0.4% the week prior.

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.
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