Increase in Purchase Apps Offsets Decline in Refis

The Mortgage Bankers Association (MBA) has reported that mortgage applications increased 0.2% week-over-week.

The Refinance Index decreased 1% from the previous week and was 16% lower than the same week one year ago. The seasonally-adjusted Purchase Index increased 2% from one week earlier. The unadjusted Purchase Index increased 2% compared with the previous week and was 10% lower than the same week one year ago.

"Mortgage rates reached their highest level since June 2021, but application activity changed little this week. An increase in home purchase applications offset a slight decline in refinances," said Joel Kan, MBA's Associate VP of Economic and Industry Forecasting. "The increase in purchase applications was welcome news, but was primarily driven by a 2% gain in conventional purchase applications, which kept the average loan size elevated."

The refinance share of mortgage activity decreased slightly to 63.9% of total applications from 64.5% the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 3.4% of total applications.

"The 30-year fixed rate reached 3.18% last week, and has risen 15 basis points over the past month, resulting in an 11% drop in refinance applications during this time,” said Kan. “Government refinance applications fell over 3% last week, driven by a decline in FHA refinances and an eight-basis-point increase in the average FHA mortgage rate. We continue to expect weakening refinance activity as rates move higher and borrowers see less of a rate incentive."

And while inventory is improving slightly, the National Association of Relators (NAR) in its latest Housing Affordability Index (HAI) found affordability showing signs of improvement, as the monthly mortgage payment fell by 1.1%, while the median family income fell modestly by 0.7%. NAR Research Data Specialist Michael Hyman found that, year-over-year, affordability declined in August, as the median family income rose by 3.9%, while the monthly mortgage payment increased 13.9%. The effective 30-year fixed-rate mortgage (FRM) was 2.89% this August compared to 3% just one year ago, and the median existing-home sales price rose 15.6% from one year ago.

“Mortgage rates continue to hover at around three percent again this week due to rising economic and financial market uncertainties,” said Sam Khater, Freddie Mac’s Chief Economist. “Unfortunately, with the expectation that both mortgage rates and home prices will continue to rise, competition remains high and housing affordability is declining.”

A federal push is on to assist with leveling housing affordability, as late last week, Rep. Maxine Waters, Chair of the House Financial Services Committee, requested that President Joseph Biden, House Speaker Nancy Pelosi, and Senate Majority Leader Charles Schumer include House Committee-passed housing provisions in the Build Back Better Act. The Act—HR 5376—earmarks $3.5 trillion to provide funding, establish programs, and modifies provisions relating to an array of areas, including housing, rental, and homeowner assistance programs, in addition to education, labor, childcare, health care, taxes, immigration, and the environment.