MortgageMortgage Rates

Mortgage applications slide 2.7% in last week of 2021

An optimistic view of the economy drove mortgage rates higher

Mortgage applications decreased 2.7% from two weeks earlier, according to the Mortgage Bankers Association survey for the week ending Dec. 31, 2021.

The results include adjustments to account for the holidays. The holiday adjusted Refinance Index decreased 2% from two weeks ago and was 40% lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 4% from two weeks earlier.

Mortgage applications increased 2% the week prior, largely due to an increase in Federal Housing Administration refinances.

“Mortgage rates continued to creep higher over the past two weeks, as markets maintained an optimistic view of the economy,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.

The 30-year fixed rate increased 6 basis points to 3.33%, the highest since April 2021, which drove a decrease in refinance activity, Kan said.

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“Refinance demand continues to dwindle, as many borrowers refinanced in 2020, and in early 2021 – when mortgage rates were around 40 basis points lower,” said Kan.

The purchase market also weakened in the last week of the year, falling to its lowest level since October 2021. Average loan sizes were lower, although home-price appreciation remains very high, Kan said.

Despite tight supply and lack of affordability, 2021 was another banner year for purchase originations. But the trade association anticipates that 2022 will surpass it, predicting that total purchase activity will reach $1.74 trillion.

Mike Fratantoni, chief economist at the MBA, forecast that millennials reaching peak first-time homebuyer age, a strong job market and continued increases in home prices will all contribute to a record-breaking 2022.

The refinance share of mortgage activity increased to 65.4% of total applications from 63.9% the previous week.

The adjustable-rate mortgage share of activity decreased to 3.3% of total applications. The FHA share of total applications increased to 9.2% from 8.5% the week prior. The VA share of total applications decreased to 11.3% from 11.4% the week prior. The USDA share of total applications stood unchanged at 0.4%.

Here is a more detailed breakdown of this week’s mortgage applications data:

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased to 3.33% from 3.31%.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $548,250) decreased to 3.31% from 3.35%.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.40% from 3.39%.

The average contract interest rate for 15-year fixed-rate mortgages remained unchanged at 2.60%.

The average contract interest rate for 5/1 ARMs decreased to 2.45% from 2.74%.

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