Mortgage applications increased 2.3% from the previous week, largely due to a strong purchase market, according to the Mortgage Bankers Association (MBA) survey for the week ending Jan. 14.
The seasonally adjusted Purchase Index rose 7.9% from the previous week, while the Refinance Index decreased 3.1% in the same period.
Compared to the same week one year ago, mortgage apps overall dropped 37.3%, with a sharp decline in refinance (-49.2%) compared to purchase (-12.2%).
According to Joel Kan, MBA’s associate vice president of economic and industry forecasting, the 30-year fixed rate reached 3.64%, more than 30 basis points over the past two weeks. Higher rates led to the “slowest pace of refinance activity in over two years,” mainly among FHA and VA loans, Kan said in a statement.
Regarding purchase applications, the average loan size set a record at $418,500. “The continued rise in purchase loan application sizes is driven by high home price appreciation and the lack of housing inventory on the market – especially for entry-level homes,” Kan said.
The economist added that government purchase applications had slower growth, contributing to the larger loan balances and suggesting that prospective first-time buyers are struggling to find homes to buy in their price range.
The refinance share of mortgage activity decreased to 60.3% of total applications last week, from 64.1% the previous week. The VA apps went from 11.4% to 10% in the same period.
The FHA share of total applications decreased from 9.9% to 9.3%. Meanwhile, the adjustable-rate mortgage share of activity increased to 3.8% of total applications. The USDA share of total applications stood unchanged at 0.4%.
The trade group estimates that the average contract 30-year fixed-rate mortgage for conforming loans ($647,200 or less) increased from 3.52% to 3.64%. For jumbo mortgage loans (greater than $647,200), rates went to 3.54% from 3.42% the week prior.
Economists expect that rates will increase in 2022 but will still be close to record-low levels. MBA forecasts that 30-year mortgage-rates will reach 4% by the end of 2022.