Purchase Apps Fall Nearly 40% YoY

After the Fed enacted yet another an interest rate hike, and an unexpectedly strong jobs report, mortgage rates moved slightly upward last week, thus forcing mortgage application volume 7.7% downward week-over-week, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 10, 2023.

The MBA’s Refinance Index decreased 13% from the previous week, and was 76% lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 6% from one week earlier. The unadjusted Purchase Index decreased 5% compared with the previous week, and was 43% lower than the same week one year ago.

“Mortgage rates increased across the board last week, pushed higher by market expectations that inflation will persist, thus requiring the Federal Reserve to keep monetary policy restrictive for a longer time. After five straight weeks of decreases, the 30-year fixed rate increased by 21 basis points to 6.39%,” said Joel Kan, MBA’s VP and Deputy Chief Economist. “Mortgage applications decreased for the second time in three weeks because of these higher rates. Refinance borrowers, both rate/term and cash-out, remain on the sidelines as current rates provide little financial incentive to act.”

As Kan noted, the refi share of mortgage activity decreased to 32% of total applications. down from 33.9% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 6.9% of total applications.

“Purchase applications dropped to their lowest level since the beginning of this year and were more than 40% lower than a year ago,” added Kan. “Potential buyers remain quite sensitive to the current level of mortgage rates, which are more than two percentage points above last year’s levels and have significantly reduced buyers’ purchasing power.”

And despite economic woes, Redfin reports that nearly one-third—or 31.2%—of U.S. home purchases were paid for with all cash in December—a total up from 28.8% a year , but remains down from the eight-year high of 31.9% hit in November 2022.

By loan type, the FHA share of total applications increased to 12.6% from 11.9% the week prior, while the VA share of total applications decreased to 12.6%, down from 13.4% the week prior. The USDA share of total applications remained unchanged at 0.6% from the week prior.