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The latest Weekly Mortgage Applications Survey from the Mortgage Bankers Association (MBA) found that overall mortgage application volume fell 1.7% week-over-week, marking the second consecutive week of declines.
The MBA’s Refinance Index increased 2% from the previous week, and was 80% lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 4% from one week earlier. The unadjusted Purchase Index decreased 14% compared with the previous week, and was 18% lower than the same week one year ago.
App volume fell despite the fact that mortgage rates fell sharply last week, dropping from 5.70% to 5.30% according to Freddie Mac’s Primary Mortgage Market Survey (PMMS).
“Mortgage rates were mostly unchanged, but applications declined for the second straight week. Purchase applications for both conventional and government loans continue to be weaker due to the combination of much higher mortgage rates and the worsening economic outlook,” said Joel Kan, MBA’s Associate VP of Economic and Industry Forecasting. “After reaching a record $460,000 in March 2022, the average purchase loan size was $415,000 last week, pulled lower by the potential moderation of home-price growth and weaker purchase activity at the upper end of the market.”
The refinance share of overall mortgage activity increased for the first time in weeks, rising to 30.8% of total applications from 29.6% the previous week. Also rising was the share of adjustable-rate mortgage (ARM) activity, increasing to 9.6% of total applications.
The uptick in refis could be attributed to last week’s drastic drop in the 30-year fixed-rate mortgage (FRM) which fell 0.40% week-over-week.
“Refinance applications increased slightly last week, driven by an uptick in conventional and FHA refinances,” said Kan. “The overall refinance index remained 5% below the average level reported in June. With the 30-year fixed rate 265-basis points higher than a year ago, refinance applications are expected to remain depressed.”
In terms of the “worsening economic outlook” noted by Kan, today’s Consumer Price Index for All Urban Consumers (CPI-U) increased 1.3% in June on a seasonally adjusted basis after rising 1.0% in May, as reported by the U.S. Bureau of Labor Statistics.
“In June, U.S. inflation according to the Consumer Price Index exceeded forecasts, increasing 9% year-over-year, with the month-over-month pace increasing as well,” said First American Chief Economist Mark Fleming. “The accelerating inflation means there’s a lot more work for the Federal Reserve to do. Another 75-point increase in the federal funds rate is almost assured.”
By loan type, the MBA reported that the FHA share of total applications decreased to 11.7% from 12% the week prior, while the VA share of total applications increased to 11.2% from 11.1% the week prior. The USDA share of total applications decreased to 0.5% from 0.6% the week prior.
