Rise in Rates Spurs Uptick in Mortgage App Volume

Even though mortgage rates took a turn upward last week, that did not stop buyers and those seeking refis to begin ramping up for the spring buying season, as the Mortgage Bankers Association (MBA) reported mortgage application volume rising 7.4% week-over-week (for the week ending March 3, 2023).

As for those seeking to refi, the MBA’s Refinance Index increased 9% from the previous week, and was 76% lower than the same week one year ago. The seasonally adjusted Purchase Index increased 7% from one week earlier. The unadjusted Purchase Index increased 9% compared with the previous week, and was 42% lower than the same week one year ago.

“Mortgage rates continued to increase last week. The 30-year fixed rate rose to 6.79%–the highest level since November 2022 and 270 basis points higher than a year ago,” said Joel Kan, MBA’s VP and Deputy Chief Economist. “Even with higher rates, there was an uptick in applications last week, but this was in comparison to two weeks of declines to very low levels, including a holiday week. Comparing the application indices from a year ago, purchase applications were still down 42%, and refinance activity was down 76%. Many borrowers are waiting on the sidelines for rates to come back down.”

The MBA reported that the refinance share of mortgage activity increased to 28.9% of total applications, up from 28.7% the previous week, while the adjustable-rate mortgage (ARM) share of activity increased to 8.6% of total applications.

By loan type, the FHA share of total applications increased to 12.8% from 12.0% the week prior. The VA share of total applications increased to 12.0% from 11.6% the week prior. The USDA share of total applications remained unchanged at 0.5 percent from the week prior.

As a rise this week was reported, the latest Fannie Mae Home Purchase Sentiment Index (HPSI) decreased 3.6 points in February to 58.0, breaking a streak of three consecutive monthly increases and returning the Index closer to its all-time survey low set in October 2022. Overall, four of the HPSI’s six components decreased month over month, most notably those associated with job security and home-selling conditions.

While both HPSI components remain positive on net, in February 44% of consumers reported that it’s a bad time to sell a home, up from 39% last month, and 24% expressed concern about losing their job in the next 12 months, up from 18% last month. Year-over-year, the full index is down 17.3 points.

Doug Duncan, Fannie Mae SVP and Chief Economist, noted, “The decline was partly driven by a substantial decrease in consumers’ sense of home-selling conditions, with most respondents who indicated it’s a ‘bad time to sell’ citing unfavorable economic conditions and mortgage rates as the primary reasons for that belief. With home-selling sentiment now lower than it was pre-pandemic–and homebuying sentiment remaining near its all-time low–consumers on both sides of the transaction appear to be feeling cautious about the housing market. We believe these results corroborate our expectation for subdued home sales in the coming quarters, particularly now that mortgage rates have begun rising again. Additionally, this month’s survey indicated an increase in job security concerns, which we’ll continue to monitor closely, since labor market uncertainty could play yet another factor in slowing housing activity.”