Mortgage App Volume Falls for Third Consecutive Week

The Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 4, 2023 found overall mortgage application volume declining 3.1% week-over-week.

The MBA’s Refinance Index decreased 4% from the previous week, and was 37% lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 3% from one week earlier, while the unadjusted Purchase Index decreased 3% compared to the previous week, and was 27% lower than the same week just one year ago.

“Treasury yields rates rose last week, and mortgage rates followed suit due to a combination of the Treasury’s funding announcement and the downgrading of the U.S. government debt rating. Rates increased for all loan types in our survey, with the 30-year fixed mortgage rate increasing to 7.09%, the highest level since November 2022,” said Joel Kan, MBA’s VP and Deputy Chief Economist. “Additionally, the rate for FHA mortgages increased to 7.02%, the highest rate since 2002. Not surprisingly, mortgage applications continued to decline given these higher rates, with overall application counts falling for the third consecutive week, as both purchase and refinance activity declined. The Purchase Index fell for the fourth consecutive week, as homebuyers continue to struggle with low for-sale inventory and elevated mortgage rates.”

The MBA reported that the refi share of mortgage activity decreased slightly to 28.7% of total applications, from 28.9% the previous week, while the adjustable-rate mortgage (ARM) share of activity rose to 6.9 percent of total applications.

By loan type, the FHA share of total applications increased to 13.6% from 13.3% the week prior. The VA share of total applications increased to 11.8% from 11.6% the week prior. The USDA share of total applications decreased to 0.4% from 0.7% the week prior.

Just two months after placing Fannie Mae and Freddie Mac (the GSEs) on ‘Rating Watch Negative,’ Fitch Ratings last week downgraded Fannie Mae's and Freddie Mac's (GSEs) Long-Term Issuer Default Ratings (IDR) and senior unsecured debt ratings to 'AA+' from 'AAA' and downgraded their respective Government Support Ratings (GSR) to 'aa+' from 'aaa'. Fitch cited concern over the country's deteriorating finances as precipitating the downgrade, and expressed major doubts about the government's ability to tackle the growing debt burden because of the sharp political divisions, exemplified by the brinkmanship over the debt ceiling that brought the government close to a disastrous default.

The Fitch downgrade of the GSEs sent a ripple effect through the housing market, as rates rose and app volume continued to tumble. In a report by Newsweek, Zillow Senior Economist Jeff Tucker notes that the GSE downgrade “shouldn't have much, if any," impact on the U.S. housing market.

“Taken together, this has had no significant net impact on yields, or the mortgage rates that tend to follow them,” Tucker told Newsweek. "Investors already saw the debt ceiling showdown and larger deficit forecasts that this rating downgrade is based on, so those risks are already priced into mortgage rates.”