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Hike in Mortgage Rates Pushes Overall Apps Further Downward

The Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey for the week ending March 25, 2022 has found that overall mortgage application volume decreased 6.8% from one week earlier.

The MBA’s Refinance Index decreased 15% from the previous week, and was 60% lower than the same week one year ago. The seasonally adjusted Purchase Index increased 1% from one week earlier. The unadjusted Purchase Index increased 1% compared with the previous week, and was 10% lower than the same week one year ago.

The refinance share of mortgage activity fell to 40.6% of total applications from 44.8% the previous week, while the adjustable-rate mortgage (ARM) share of activity increased to 6.6% of total applications.

"Mortgage rates jumped to their highest level in more than three years last week, as investors continue to price in the impact of a more restrictive monetary policy from the Federal Reserve,” said Mike Fratantoni, MBA SVP and Chief Economist. “Not surprisingly, refinance application volume declined further, as fewer borrowers have an incentive to apply at rates that are significantly higher than a year ago. Refinance application volume is now 60% below last year's levels, in line with MBA's forecast for 2022.”

Freddie Mac reported that mortgage rates rose to 4.42% for the week ending March 24, 2022, up from the previous week when fixed-rates averaged 4.16%.

By loan type, the FHA share of total applications increased to 9.3% from 8.8% the week prior, while the VA share of total applications decreased to 9.5% from 9.8% the week prior. The USDA share of total applications increased slightly to 0.5% from 0.4% the week prior.

"Even with the ongoing climb in rates, purchase application volumes were little changed last week,” added Fratantoni. “This is particularly auspicious, as we are now in the beginning of the spring homebuying season, and those shopping for homes are struggling with not only higher and more volatile mortgage rates, but also an ongoing shortage of homes on the market. Given these hurdles, it appears to be promising news that purchase application volume has not declined, as many potential buyers are likely feeling the squeeze in their purchasing power from the jump in rates."

Affordability concerns remain for buyers, especially first-time buyers struggling to save for a down payment, as Redfin recently reported that housing prices jumped the most since summer 2021—up 17% year-over-year to a new high. At the same time, a 7% decline in new listings kept homebuyer competition elevated as inventory concerns remain nationwide.

The rise in mortgage rates, spurred on by the recent hike in the Fed funds rate, continues to hit buyers in the wallet. Combined with continued supply chain concerns, buyers are absorbing builder costs as recent gains in lumber, combined with limited availability of numerous types of building products, has put building materials up 20.4% year-over-year, and 31.3% since January of 2020.

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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