Mortgage apps continue downward trend

The market composite index fell 1.2% as rates this week rose to the highest level in nearly a month

Demand for mortgage loans continued to decline last week, remaining at the lowest level in two decades, according to the Mortgage Bankers Association (MBA). 

The market composite index, a measure of mortgage loan application volume, fell 1.2% for the week ending Aug. 19, compared to the previous week. It was also down 63% compared to the same week in 2021.  

The refinance index had a 2.75% decline from the previous week and fell 83% from the same week in 2021. Meanwhile, according to the MBA, the purchase index was down 0.5% from the previous week and decreased 21% from the same week in 2021. 

“Mortgage applications continued to remain at a 22-year low, held down by significantly reduced refinancing demand and weak home purchase activity,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting, in a statement. 

Compared to the previous week, applications for refis declined in conventional (-3.6%) and government (-0.3%) products. However, purchase results varied, with a 2% decrease in conventional applications and a 4% increase in government, “which is potentially a sign of more first-time homebuyer activity,” according to Kan. 

Meanwhile, Kan said the average purchase loan size continued to trend lower as purchase activity at the high end of the market is weakening. 

How lenders can improve business models in 2022

As 2022 proves to be a challenging year for the housing market, lenders are looking to take advantage of market downtime by improving their internal processes. HousingWire recently spoke with James Deitch, CEO of Teraverde, about the changes lenders can make to their business models in order to remain profitable.

Presented by: Teraverde

Due to the Federal Reserve’s rate hike of 75 basis points on July 27 to combat persistent inflation, the housing market was expected to be cooling. 

Mortgage rates seem to be stabilizing in the low 5% range, according to the latest survey from Freddie Mac. It showed the 30-year fixed-rate mortgage decreasing last week to an average of 5.13%.

MBA’s estimate, however, indicated the average contract 30-year fixed-rate mortgage for conforming loans ($647,200 or less) rose to 5.65% this week to the highest level in nearly a month, from the previous week’s 5.45%. Jumbo mortgage loans (greater than $647,200) increased to 5.28% from 5.14% in the same period. 

The MBA data shows the refinance share of all mortgage activity fell marginally to 31.1% of total applications this week from the previous week’s 31.2%. 

The Federal Housing Administration’s (FHA) share of total applications increased to 12.5% from the previous week’s 12%. The Veterans Affairs’s (VA) share of applications rose to 11.6%, from 11.2%, and the United States Department of Agriculture’s (USDA) share went from 0.6% to 0.7%. 

The share of adjustable-rate mortgages (ARM) applications decreased to 6.5% this week, from 7.4% of total applications last week. According to the MBA, the average interest rate for a 5/1 ARM increased to 4.81% from 4.43% a week prior. 

“The spread between conforming fixed-rate loans and ARM loans narrowed to 84 basis points from over 100 basis points the prior week. This movement made fixed rate loans relatively more attractive than ARMs, thereby reducing the ARM share further from highs seen earlier this year,” Kan said. 

The survey, conducted weekly since 1990, covers 75% of all U.S. retail, residential mortgage applications.

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