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Refis Drop to Just 50% of Overall App Volume

The trend of rising rates continues to push down mortgage application volume, as the latest Weekly Mortgage Applications Survey [1] from the Mortgage Bankers Association (MBA) [2] has found that mortgage application volume decreased 13.1% over the previous week [3] (for the week ending February 18, 2022).

The MBA’s Refinance Index decreased 16% from the previous week, and was 56% lower than the same week just one year ago. The seasonally adjusted Purchase Index decreased 10% from one week earlier. The unadjusted Purchase Index decreased 6% compared to the previous week [3], and was 6% lower than the same week one year ago.

"Mortgage applications dropped to their lowest level since December 2019 last week, as mortgage rates continued to inch higher,” said Joel Kan [4], MBA's Associate VP of Economic and Industry Forecasting. “The 30-year fixed rate was 4.06%, almost a full percentage point higher than a year ago. Higher mortgage rates have quickly shut off refinances, with activity down in six of the first seven weeks of 2022. Conventional refinances in particular saw a 17% decrease last week.”

The refinance share of mortgage activity decreased to 50.1% of total applications, down from 52.8% of overall apps the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.1% of total applications.

"Purchase applications, already constrained by elevated sales prices and tight inventory, have also been impacted by these higher rates and declined for the third straight week,” said Kan. “While the average loan size did not increase this week, it remained close to the survey's record high."

By loan type, the FHA share of total applications increased to 8.7% from 8.3% the week prior, while the VA share of total apps increased to 9.9% from 9.3% the week prior. The USDA share of total applications remained unchanged at 0.4% from the week prior.

The latest Federal Housing Finance Agency House Price Index (FHFA) [5], found that U.S. home prices rose 17.5% from Q4 of 2020 to Q4 of 2021, up 3.3% compared to Q3 of 2021. FHFA's seasonally adjusted monthly index for December was up 1.2% from November.

The spike in prices continues to be sparked by the nationwide shortage in homes and listings, as the few homes available are selling at a rapid clip, as Redfin recently reported [6] that homebuyers are faced to contend with the fastest market on record during the four weeks ending February 13, as a record 57% of homes that went under contract sold within two weeks of being listed. Redfin also reported that asking prices jumped 16% year-over-year [6] to a new high. Mortgage rates also climbed to their highest level since May 2019, nearing $2,000. New listings fell 8%, sending overall supply to a record low.