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Refi applications fall to 53% of mix amid rate spike

Overall, mortgage apps decreased 5.4%

Mortgage applications decreased 5.4% for the week ending Feb. 11, reflecting what the mortgage market looks like when rates eclipse 4% for the first time since 2019.

The Mortgage Bankers Association‘s seasonally adjusted refi index fell 8.9% from the previous week, bringing its share of total applications to the lowest level in 19 months. Meanwhile, the purchase index dropped a mere 1.2%.

Compared to the same week one year ago, mortgage apps overall dropped 39.8%, with a sharp decline in refi (-54.1%) compared to purchase (-6.8%). The survey, conducted weekly since 1990, covers over 75% of all U.S. retail residential mortgage applications.   

According to Joel Kan, MBA’s associate vice president of economic and industry forecasting, an unrelenting inflationary pressure increased market expectations of more aggressive policy moves by the Federal Reserve. It moved Treasury yields and, consequently, mortgage rates higher.

The trade group estimates that the average contract 30-year fixed-rate mortgage for conforming loans ($647,200 or less) increased to 4.05% from 3.83% the week prior, above the 4% mark for the first time since 2019. For jumbo mortgage loans (greater than $647,200), rates climbed to 3.81% from 3.62% the week prior. 

The keys to lending in a post-refi boom world

As record refinance volumes disappear, lenders need to get intimately familiar with their database of customers. Being a resource for all real estate financing needs for your customers will become more important in the next few years than ever before. 

Presented by: CIVIC Financial

“Consistent with this period of higher mortgage rates, refinance applications fell 9% last week and stood at around half of last year’s pace. The refinance share of applications was also at its lowest level since July 2019,” Kan said.  

The survey showed that the refi share of mortgage activity decreased to 52.8% of total applications last week, from 56.2% the previous week. The VA apps fell to 9.3% from 10% in the same period.

The FHA share of total applications increased to 8.3% from 8% the prior week. Meanwhile, the adjustable-rate mortgage share of activity increased from 4.5% to 5% and the USDA held steady at 0.4%.   

Regarding purchases applications, the modest decline over the week was mainly due to the fall in government purchase applications. “Prospective buyers still face elevated sales prices in addition to higher mortgage rates. The heavier mix of conventional applications again contributed to another record average loan size at $453,000.”

Economists had predicted rates would rise in 2022 as the overall economy stabilized, reducing mortgage applications.

For the coming weeks, Kan told HousingWire that If conditions stay in the current state, we’ll certainly see higher rates. However, rates could quickly head in the other direction, “if something abroad rocks the boat,” such as an armed conflict with Russia and Ukraine, an emergent Covid variant, or a sudden change in certain commodity prices. 

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