MortgageMortgage Rates

Mortgage applications fall amid low inventory, rising rates

Refinance applications, in a free fall, are now 38.8% of the mix

Interest in residential mortgage loans fell 6.25% for the week ending April 1 as rates jumped yet again, ever nearer to 5%, according to the Mortgage Bankers Association‘s latest survey.

Refinance applications are in a free fall, as few borrowers these days have an incentive to change their current loans rates. Additionally, home price appreciation and insufficient for-sale inventory are holding back purchase activity.   

According to the MBA, refi applications fell 10% from the prior week and 62% from a year ago. Meanwhile, the seasonally adjusted purchase index decreased 3.4% from the prior week and was down 9% year-over-year.

“Mortgage application volume continues to decline due to rapidly rising mortgage rates, as financial markets expect significantly tighter monetary policy in the coming months,” Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in a statement.  

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $647,200) increased to 4.90% from 4.80%. Meanwhile, for jumbo mortgage loans (greater than $647,000), rates on average jumped to 4.51% from 4.40% in the same period.

According to Kan, as higher rates reduce the incentive to refinance, application volume dropped to its lowest level since the spring of 2019. In total, refinances share of all applications dipped to 38.8%, down from 40.6% the previous week and 51% a year ago.

Why lenders should think about non-QM now, not later

Agency rates are on the rise and refinance volume is down. Originators who had their best year in 2021 will have to utilize something else to make up for this loss in 2022 and non-QM can be the answer. 

Presented by: Angel Oak

Regarding purchases, Kan said the hot job market and rapid wage growth continue to support housing demand. However, surge in rates, home-price appreciation, and insufficient for-sale inventory is restraining purchase activity.

“Additionally, the elevated average purchase loan size, and steeper 8% drop in FHA purchase applications, are both indicative of first-time buyers being disproportionately impacted by supply and affordability challenges.”

The MBA found that the adjustable-rate mortgage share of the activity increased to 6.8% of total applications from 6.6%. The FHA share of total applications dropped to 9.2% from 9.3% a week earlier, and the share of VA applications increased to 9.8% from 9.5%. The USDA share remained unchanged at 0.5%.

The survey, conducted since 1990, covers over 75% of the retail residential mortgage applications.

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