Spark in Refi and Purchase Apps Drives Volume Upward

The Weekly Mortgage Applications Survey from the Mortgage Bankers Association (MBA) found that mortgage application volume rose 12% week-over-week, for the week ending January 28, 2022.

The MBA’s Refinance Index increased 18% from the previous week, and was 50% lower than the same week one year ago. The MBA’s Purchase Index increased 12% compared to the previous week, and was 7% lower than the same week just one year ago.

"Most mortgage rates in MBA's survey continued to rise, with the 30-year fixed rate reaching its highest level since March 2020 at 3.78%,” said Joel Kan, MBA's Associate VP of Economic and Industry Forecasting. “Despite the increase in rates, refinance applications were up 18%, driven mainly by a 22% jump in conventional applications. There has likely been some recent volatility in application counts due to holiday-impacted weeks, as well as from borrowers trying to secure a refinance before rates go even higher.”

With the rise in rates, those entertaining refinances may be moving off the fence and finally following through, as the refinance share of mortgage activity increased to 57.3% of total applications, up from 55.8% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 4.5% of total applications.

The rise in home price appreciation is still fostered by a nationwide low in inventory, as CoreLogic’s latest Home Price Index (HPI) and HPI Forecast reports price appreciation averaging 15% for the full year of 2021, up from the 2020 full year average of 6%. Home price growth in 2021 started off at 10% in Q1, steadily increasing and ending the year with an increase of 18% for Q4.

“Purchase applications also increased in the final full week of January, but remained 7% lower than a year ago,” said Kan. “Stubbornly low inventory levels and swift home-price growth continue to push average loan sizes higher."

And those jumping into the market are paying a premium, as First American found that real house prices increased by 21% year-over-year or 1.5% over October’s totals, with the average home now costing $475,180—up $2,818 from $472,362 in October.

By loan type, the FHA share of total applications fell to 7.7% from 8.6% the week prior, while the VA share of total applications decreased to 9.1% from 9.9% the week prior. The USDA share of total applications decreased slightly to 0.4% from 0.5% the week prior.