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Mortgage Application Activity Falls to 22-Year Low

As mortgage rates begin to ascend once again, mortgage application volume continued to fall, dipping 6.3% week-over-week according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 15, 2022.

In addition to the overall drop in app volume, the MBA’s Refinance Index decreased 4% from the previous week, and is now 80% lower than the same week just one year ago. This too was attributed to an upswing in the 30-year fixed-rate mortgage (FRM), as it rose to 5.51% last week according to Freddie Mac.

The MBA reported that the seasonally adjusted Purchase Index decreased 7% from one week earlier, and while the unadjusted Purchase Index increased 16% compared with the previous week, it was 19% lower than the same week one year ago.

“Mortgage applications declined for the third week in a row, reaching the lowest level since 2000. Similarly, with most mortgage rates more than two percentage points higher than a year ago, demand for refinances continues to plummet, with MBA’s Refinance Index also falling to a 22-year low,” said Joel Kan, MBA’s Associate VP of Economic and Industry Forecasting. “Purchase activity declined for both conventional and government loans, as the weakening economic outlook, high inflation, and persistent affordability challenges are impacting buyer demand. The decline in recent purchase applications aligns with slower homebuilding activity due to reduced buyer traffic and ongoing building material shortages and higher costs.”

And while rates were moving upward, the MBA found that the refi share of overall mortgage activity increased to 31.4% of total applications, up slightly from 30.8% the previous week. Perhaps that slight rise in refis was due to fears of even further rate hikes amid continued fears of a recession.

Those high rates forced the adjustable-rate mortgage (ARM) share of activity the other way, as ARM activity decreased to 9.5% of total applications.

As Kan mentioned, ongoing building material shortages and higher costs are slowing buyer traffic, as the National Association of Home Builders (NAHB) reported that market confidence for newly-built single-family homes posted its seventh consecutive month of declines in July 2022, as builder confidence continues to drop.

“Production bottlenecks, rising home building costs and high inflation are causing many builders to halt construction because the cost of land, construction and financing exceeds the market value of the home,” said NAHB Chairman Jerry Konter, a home builder and developer from Savannah, Ga.

By loan type, the MBA reported this week that the FHA share of total applications increased to 12.4% of overall volume, up from 11.7% recorded the week prior. The VA share of total applications decreased to 10.6% from 11.2% the week prior, while the USDA share of total applications increased slightly to 0.6% from 0.5% the week prior.

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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