Mortgage application volume dropped 6.9% for the week ending Oct. 1, as higher rates reduced borrowers’ waning appetites for refis even further, according to the Mortgage Bankers Association (MBA). On an unadjusted basis, the index fell 7% in the period.
Pushing the decline was the refinance index, which dipped by 10% from the previous week to its lowest level in three months. Meanwhile, the purchase activity decreased by 2% from the prior week, the trade group said.
The MBA’s overall mortgage application index decreased by 15% compared to one year ago, showed the survey published today. The purchase index shrank 13%, and the refi index contracted 16%.
Joel Kan, MBA’s associate vice president of economic and industry forecasting, said that “higher rates are reducing borrowers’ incentive to refinance, as declines were seen across all loan types.”
The purchase activity fell driven by a 2.5% drop in conventional loans application. Meanwhile, government purchase applications increased 1.4%. According to Kan, it was not enough to bring down the average loan balance of $410,000.
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“With home-price appreciation and sales prices remaining very elevated, applications for higher balance, conventional loans still dominate the mix of activity,” he added.
The refi share of mortgage activity decreased to 64.5% of total mortgage applications from 66.4% the previous week. The adjustable-rate mortgage (ARM) share remained unchanged at 3.4% of total applications.
Concurrently, FHA’s share of total applications increased one basis point to 10.5%, and V.A.’s share of applications increased to 10.3% from 10.2% the week prior. The share of USDA applications went from 0.4% to 0.5%.
Applications declined last week as mortgage rates increased above 3% for the first time since June.
MBA’s survey noted that the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased four basis points to 3.14%.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loans rose to 3.20% from 3.14%, and 30-year fixed-rate mortgages backed by the FHA went from 3.09% to 3.12%, the report concluded.