Mortgage application volume dropped 1.3% for the week ending on April 8, from the previous week, as mortgage rates eclipsed the 5% mark.
Refinance applications fell 5% from the prior week and 62% from the same week a year ago, according to the Mortgage Bankers Association‘s weekly survey.
“Mortgage rates have spiked more than 1.5 percentage points thus far in 2022,” Mike Fratantoni, MBA’s senior vice president and chief economist, said in a statement. “The jump in mortgage rates will slow the housing market and further reduce refinance demand the rest of the year.”
Mortgage rates across all loan types continued an upward trend with the 30-year fixed rate exceeding 5.13% this week in the highest rate since November 2018, according to Joel Kan, MBA’s associate vice president of economic and industry forecasting.
Higher mortgage rates pushed up borrower interest in adjustable rate mortgages, with that share of applications last week increasing to 7.4%, the highest since June 2019. Refinance share of all applications dipped to 37.1% last week from 38.8% from the previous week.
The FHA share of total applications rose to 9.5% from the previous week’s 9.2%. While the VA share of total applications climbed to 9.9% from 9.8% a week earlier, the USDA share remained unchanged at 0.5%.
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On the purchase side, the association expects higher home prices, mortgage rates, and ongoing supply constraints to lead to a decline in existing home sales. Despite the sluggish sales in existing home sales this year, growth in new residential sales and the rapid rise in housing prices is forecast to deliver a 4% annual growth in purchase origination volume, setting a record.
The MBA forecasts that purchase originations will eclipse $1.7 trillion in 2022, a 4% increase from 2021, citing faster-than expected mortgage rate increases, potential actions from the Federal Reserve to curb inflation. Refinance originations are expected to fall 64% to $841 billion this year and decline another 20% in 2023.
The survey, conducted since 1990, covers more than 75% of the retail residential mortgage applications.