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Fed Rate Hike Drives Down Mortgage Application Volume

Week-over-week, mortgage application volume has fallen 8.1%, according to the latest Weekly Mortgage Applications Survey for the week ending March 18, 2022 from the Mortgage Bankers Association (MBA).

The MBA’s Refinance Index decreased 14% from the previous week, and was 54% lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 2% from one week earlier, while the unadjusted Purchase Index decreased 1% compared with the previous week, and was 12% lower than the same week one year ago.

"Rates on 30-year conforming mortgages jumped by 23 basis points last week, the largest weekly increase since March 2020. The jump in rates comes as markets moved to price in a much faster pace of rate hikes, as well as expectations of fewer MBS purchases from the Federal Reserve,” said Mike Fratantoni, MBA's SVP and Chief Economist.

Spurred by last week’s Fed rate hike, mortgage rates have risen in tandem, as it has been 732 days since the Federal Reserve Open Market Committee (FOMC) cut interest rates at the outset of the pandemic. However, the FOMC raised the nominal interest rate by 25 basis points to 0.25-0.50% last week. The quarter-point rate increase comes as inflation hit 7.9% in February, marking the steepest rise in prices since 1982.

The refinance share of mortgage activity decreased to 44.8% of total applications, from 48.4% the previous week, while the adjustable-rate mortgage (ARM) share of activity increased to 6.4% of total applications.

By loan type, the FHA share of total applications increased slightly to 8.8% from 8.7% the week prior, while the VA share of total applications decreased to 9.8% from 10.5% the week prior. The USDA share of total applications decreased slightly as well, falling to 0.4% from 0.5% the week prior.

"Purchase application volume was down slightly for the week, with a larger drop in FHA and VA purchase volume, and a small decline in conventional purchase loans,” added Fratantoni. “First-time homebuyers, who rely on these government programs, are increasingly challenged by both the rapid increase in home prices and higher mortgage rates. Repeat homebuyers, who are more likely to use conventional loans, benefit from the gains in home equity realized on a sale which can be used to fuel their next purchase, even with rates moving higher."

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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