Mortgage rates continue to slide, however overall mortgage application volume slide this week as well.
Freddie Mac, in its latest Primary Mortgage Market Survey (PMMS) [1], reports that the 30-year fixed-rate mortgage (FRM) averaged 6.33% for the week ending December 8, 2022, down yet again from last week when the FRM averaged 6.49% [2]. A year ago at this time, the 30-year FRM averaged 3.10%. This marked the fourth consecutive week of declines of the 30-year FRM.
“Mortgage rates decreased for the fourth consecutive week, due to increasing concerns over lackluster economic growth,” said Sam Khater, Freddie Mac’s Chief Economist [3]. “Over the last four weeks, mortgage rates have declined three quarters of a point, the largest decline since 2008. While the decline in rates has been large, homebuyer sentiment remains low [4] with no major positive reaction in purchase demand to these lower rates.”
Also this week, the 15-year FRM averaged 5.67%, down from last week when it averaged 5.76%. A year ago at this time, the 15-year FRM averaged just 2.38%.
And despite the month-long decline in mortgage rates, the Mortgage Bankers Association (MBA) reported that overall mortgage application volume fell week-over-wee [5]k, decreasing 1.9% from last week, according to the MBA’s Weekly Mortgage Applications Survey.
The MBA’s Refinance Index rose 5% from the previous week, yet was 86% lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 3% from one week earlier. The unadjusted Purchase Index increased 31% compared to the previous week, and was 40% lower than the same week one year ago.
“Mortgage applications decreased 2% compared to the Thanksgiving holiday-adjusted results from the previous week, even as mortgage rates continued to trend lower,” said Joel Kan, MBA’s VP and Deputy Chief Economist [6]. “Additionally, the pace of refinancing remained around 80% lower than a year ago.”
The steady decline in rates is spurring renewed interest in the refi market as the refinance share of mortgage activity increased to 28.7% of total applications from 26.1% the previous week. The adjustable-rate mortgage (ARM) share of activity fell to just 7.6% of total applications.
By loan type, the FHA share of total applications increased to 13.7% from 12.2% the week prior, while the VA share of total applications increased slightly to 11.4% from 11.2% the week prior. The USDA share of total applications increased to 0.6% from 0.5% the week prior.
“Purchase activity slowed last week, with a drop in conventional purchase applications partially offset by an increase in FHA and USDA loan applications,” added Kan. “The average loan size for purchase applications decreased to $387,300–its lowest level since January 2021. The decrease was consistent with slightly stronger government applications and a rapidly cooling home-price environment.”