Mortgage application volume declined by 1.1% for the week ending Sept. 24, after a rebound in the previous week, according to the Mortgage Bankers Association (MBA).
On an unadjusted basis, MBA’s index decreased by 1.3% compared to the previous week, showed the survey published today. The purchase index shrank 1.9%, and the refi index contracted 0.9%.
Joel Kan, MBA’s associate vice president of economic and industry forecasting, said that Treasury yields increased due to optimism about the strengthening economy. “Mortgage rates in response rose across all loan types, with the benchmark 30-year fixed rate reaching its highest level since early July 2021,” he said.
Kan added that the increase in rates occurred “mostly later in the week,” but it was enough to lead to a decrease in both purchase and refinance mortgage applications.
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Last week, the Federal Reserve signaled it would reduce its $120 billion monthly purchases of U.S. Treasury bonds and mortgage-backed securities – when progress is made in the labor market. Such an action is guaranteed to push up mortgage rates.
In the week ending Sept. 23, the average 30-year-fixed mortgage rate rose, ever so slightly, to 2.88%.
Another reason for the decline in applications is the appreciation of home prices, which have steadily been going up for over a year now.
Mortgage applications for larger loan amounts “continue to outpace lower-balance loans,” said Kan. “The average loan size for a purchase application reached $410,000, its highest level since May 2021.”
MBA’s survey noted that the refi share of mortgage activity increased to 66.4% of total mortgage applications from 66.2% the previous week. The adjustable-rate mortgage (ARM) share rose to 3.4% of total applications.
Concurrently, FHA’s share of total applications dipped to 10.4% from 11.5%, and V.A.’s share of applications increased to 10.2% from 10.4% the week prior. The share of USDA applications decreased only one basis point to 0.4%.
Meanwhile, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased seven basis points to 3.10%.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loans rose to 3.14% from 3.11%, and 30-year fixed-rate mortgages backed by the FHA went from 3.07% to 3.09%, the report concluded.