Purchase Mortgage Apps Down 27% YoY

According to the Mortgage Bankers Association (MBA), overall mortgage application volume fell 1.3% from one week earlier, according to the MBA’s Weekly Mortgage Applications Survey for the week ending September 22, 2023.

The MBA’s Refinance Index decreased just 1% from the previous week, and was 21% lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 2% from one week earlier, and the unadjusted Purchase Index decreased 2% compared with the previous week, and was 27% lower than the same week one year ago.

The MBA also reported that the refinance share of mortgage activity rose to 31.9% of total applications, up from 31.6% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 7.5% of total applications.

“Mortgage rates moved to their highest levels in over 20 years as Treasury yields increased late last week. The 30-year fixed mortgage rate increased to 7.41%, the highest rate since December 2000, and the 30-year fixed jumbo mortgage rate increased to 7.34%, the highest rate in the history of the jumbo rate series dating back to 2011,” said Joel Kan, MBA’s VP and Deputy Chief Economist. “Based on the FOMC’s most recent projections, rates are expected to be higher for longer, which drove the increase in Treasury yields. Overall applications declined, as both prospective homebuyers and homeowners continue to feel the impact of these elevated rates. The purchase market, which is still facing limited for-sale inventory and eroded purchasing power, saw applications down over the week, and 27% behind last year’s pace. Refinance activity was down over 20% from last year, and accounted for approximately one third of applications. Many homeowners have little incentive to refinance.”

By loan type, the FHA share of total applications decreased slightly to 14.1%, down from 14.2% the week prior, while the VA share of total applications decreased to 10.9% from 11% the week prior. The USDA share of total applications increased to 0.5% from 0.4% the week prior.

News of the Federal Reserve holding steady the nominal interest rate last week impacts shows they are closely watching the nature of the economy before making any moves before year-end.

“Previously, the Fed had seemingly signaled a commitment to being aggressive, potentially even again raising interest rates multiple times before the end of this year to continue efforts to drive down inflation,” said Michele Raneri, VP and Head of U.S. Research and Consulting at TransUnion. “While they still very well may follow through with that before the end of this year, this week’s announcement indicates that the Fed may believe that the best course of action, for now, is to continue monitoring the economy, and the effects of previous hikes, to determine if and when additional rate hikes are necessary. The decision not to raise rates at present will likely have impacts across the credit markets. In the mortgage market, for instance, consumers who have been holding off may begin to be motivated by the announcement to consider making the home purchase they have been waiting on.”

Americans are still skeptical of an impending recession and of their own short-term finances, as a new report from Bank of America reveals that two-thirds (67%) of employees believe the cost of living is outpacing growth in their salary or wages, a percentage compared to just 58% in February 2022. The Bank of American study found that over the last year, the impact of inflation and economic uncertainty has contributed to increased financial stress and financial wellness among employees dropping to 42%, the lowest rate since this research began in 2010. Despite which, more than half (56%) of employees remain cautiously optimistic about their financial well-being over the next two to three years.

“American workers continue to feel stressed about their finances and are concerned about keeping up with the cost of living,” said Lorna Sabbia, Head of Retirement and Personal Wealth Solutions at Bank of America. “Companies who show a sense of urgency for their workforce by offering financial wellness programs and resources which support employees’ immediate needs and overall well-being will continue to stand out as employers’ of choice.”