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Slight Rise in Rates Forces Decline in Mortgage Apps

The latest Weekly Mortgage Applications Survey from the Mortgage Bankers Association (MBA) for the week ending October 1, 2021 has found that mortgage applications decreased 6.9% from the previous week. The Market Composite Index, a measure of mortgage loan application volume, decreased 6.9% on a seasonally-adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 7% compared to the previous week.

The Refinance Index decreased 10% from the previous week, 16% 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 2% compared with the previous week, and was 13% lower than the same week one year ago.

"Mortgage applications to refinance dropped almost 10% last week to the lowest level in three months, as the 30-year fixed rate increased to 3.14 percent—the highest since July. Higher rates are reducing borrowers' incentive to refinance, as declines were seen across all loan types," said Joel Kan, MBA's Associate VP of Economic and Industry Forecasting. "Purchase activity also fell, driven by a drop in conventional loan applications. Government purchase applications were up over 1%, but that was still not enough to bring down the average loan balance of $410,000. With home-price appreciation and sales prices remaining very elevated, applications for higher balance, conventional loans still dominate the mix of activity."

Freddie Mac’s latest Primary Mortgage Market Survey (PMMS) found the 30-year fixed-rate mortgage (FRM) rise above the 3% mark to 3.01% for the week ending September 30, 2021.

The refinance share of mortgage activity decreased to 64.5% of total applications from 66.4% the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 3.4% of total applications.

“As industry experts have predicted, we are starting to see the refinance market slow—and the purchase market has not yet picked up the slack,” said Sales Boomerang CEO Alex Kutsishin in his company’s Q3 2021 Mortgage Market Opportunities Report. “Still, the big-picture view says we are still in the midst of a housing boom. Ample purchase and refinance opportunities remain, and our data intelligence points to myriad ways lenders can improve borrowers’ financial position with the right loan product.”

CoreLogic’s Home Price Index (HPI) and HPI Forecast for August 2021 has found that home prices rose to an all-time high in August to 18.1%, compared to August 2020, marking the largest 12-month growth in the U.S. Index since the series began (January 1976–January 1977). On a month-over-month basis, home prices increased by 1.3% compared to July 2021. Continued affordability challenges within the housing supply-constricted market have also been exacerbated by an influx in homebuying activity from investors.

“Home prices continue to escalate at a torrid pace as a broad spectrum of buyers drive demand for a limited supply of homes," said Frank Martell, President and CEO of CoreLogic. "We expect to see the trend of strong price gains continue indefinitely with large amounts of capital chasing too few assets.”

The MBA also reported that the FHA share of total applications increased slightly to 10.5% from 10.4% the week prior. The VA share of total applications increased to 10.3% from 10.2% the week prior. The USDA share of total applications increased slightly to 0.5% from 0.4% 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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