Rise in Rates Brings Another Dip in Refi Apps

Mortgage applications decreased 1.2% week-over-week, according to the latest Weekly Mortgage Applications Survey from the Mortgage Bankers Association (MBA).

The Refinance Index decreased 3% from the previous week, and was 49% lower than the same week one year ago. The seasonally adjusted Purchase Index increased 1% from one week earlier. The unadjusted Purchase Index increased 2% compared to the previous week, and was 8% lower than the same week one year ago.

"Mortgage rates continue to be volatile due to the significant uncertainty regarding Federal Reserve policy and the situation in Ukraine,” said Joel Kan, MBA's Associate VP of Economic and Industry Forecasting. “Investors are weighing the impacts of rapidly increasing inflation in the U.S. and many other parts of the world against the potential for a slowdown in economic growth due to a renewed bout of supply-chain constraints.”

The refinance share of mortgage activity continued to drop, falling to 48.4% of total applications from 49.5% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.6% of total applications.

"Purchase applications slightly increased, with both conventional and VA loan applications seeing gains,” added Kan. “The average purchase application loan size remained elevated at $453,200—the second-highest amount in MBA's survey."

After two consecutive weeks of declines, mortgage rates rose once again, as Freddie Mac’s latest Primary Mortgage Market Survey (PMMS) found the 30-year fixed-rate mortgage (FRM) rising to 3.85% with an average 0.8 point for the week ending March 10, 2022.

By loan type, the FHA share of total applications remained unchanged at 8.7% from the week prior. The VA share of total applications increased slightly to 10.5%, from 10.4% the week prior. Meanwhile, the USDA share of total applications remained unchanged at 0.5% from the week prior.

News of today's rate hike by the Fed will surely impact both mortgage rates and application volume moving forward.

“Mortgage rates have already been increasing for many reasons, an improving economy, higher inflation expectations and Fed tightening," said First American Deputy Chief Economist Odeta Kushi. "As rates rise, some buyers on the margin will pull back from the market and sellers will adjust price expectations, resulting in a moderation in house price appreciation. The other implication of a rising mortgage rate environment is the rate lock-in effect. Many homeowners have locked into historically low rates, and are less likely to move as rates move higher-this does not bode well for housing supply.”