Mortgage Application Activity Falls to Four-Year Low

As mortgage rates reached a 13-year high last week, mortgage application volume continued to trend downward, falling 8.3% week-over-week for the week ending April 22, 2022.

The Mortgage Bankers Association’s (MBA) latest Weekly Mortgage Applications Survey also found the Refinance Index decreasing 9% from the previous week, which was 71% lower than the same week just one year ago. The seasonally adjusted Purchase Index decreased 8% from one week earlier, while the unadjusted Purchase Index decreased 7% compared to the previous week, and was 17% lower than the same week one year ago.

And while the overall refinance share of mortgage activity dropped slightly to just 35% of total applications, down from 35.7% the previous week, adjustable-rate mortgages (ARMs) continue to rise in popularity, rising to 9.3% of total applications.

“With mortgage rates increasing last week to the highest level since 2009, applications continued to decline,” said Joel Kan, MBA’s Associate VP of Economic and Industry Forecasting. “Overall application activity fell to the lowest level since 2018, with both purchase and refinance applications posting declines. Refinance applications were 70% below the same week a year ago, when the 30-year fixed rate was in the 3% range.”

Interest in ARMs continues to rise, as Freddie Mac reported that fixed-rate mortgages (FRMs) crossed the 5% mark last week, rising to 5.11%, marking the seventh straight week of increases found in FRMs.

“In a period of high home-price growth and rapidly increasing mortgage rates, borrowers continued to mitigate higher monthly payments by applying for ARM loans,” said Kan. “The ARM share of applications last week was over 9% by loan count, and 17% based on dollar volume. At 9%, the ARM share was double what it was three months ago, which also coincides with the 1.5-percentage point increase in the 30-year fixed rate.”

By loan type, the FHA share of total applications increased to 10.6% from 9.9% the week prior, while the VA share of total applications rose slightly to 10.2% from 10.1% the previous week. The USDA share of total applications remained steady at 0.5% from the week prior.

“The drop in purchase applications was evident across all loan types,” added Kan. “Prospective homebuyers have pulled back this spring, as they continue to face limited options of homes for sale along with higher costs from increasing mortgage rates and prices. The recent decrease in purchase applications is an indication of potential weakness in home sales in the coming months.”

Further evidence of waning application volume was found by a recent consumer survey by Fannie Mae. The GSE found that an additional 20% of respondents believe that housing affordability has declined, along with affordable houses in general being harder to find. However, 92% of the homeowners polled reported that they felt their home mortgage was still affordable in the current real estate market.