As Mortgage Rates Soar, ReFis Crash
The MBA finds total mortgage applications were down for the third week in a row.
Mortgage applications to banks and brokers last week were 6% lower in value and numbers than the previous week, and down 29% in value from a year earlier as refinances plummeted and purchases grew slowly, the Mortgage Bankers Association reported Wednesday.
The MBA’s Weekly Mortgage Applications Survey for the week ending March 25 marked the third week in a row that its composite index had fallen from the previous week.
After seasonal adjustments the week’s fall was close to 7%, with the number of purchase applications up 1% and refinances down 15%.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 4.80% last week from 4.50% a week earlier. The rate has risen much faster than the MBA forecast, a point above its first-quarter forecast and already exceeding its year-end forecast of 4.5%.
Mike Fratantoni, the MBA’s chief economist, said last week’s mortgage rates were the highest in more than three years as investors continue to price in the impact of a more restrictive monetary policy from the Federal Reserve.
“Not surprisingly, refinance application volume declined further, as fewer borrowers have an incentive to apply at rates that are significantly higher than a year ago,” Fratantoni said. “Refinance application volume is now 60% below last year’s levels, in line with MBA’s forecast for 2022.”
Total originations have been falling since peaking at $1.36 trillion in the fourth quarter of 2020 as the height of the refinance boom.
The MBA’s March 21 forecast showed $689 billion in total originations in the first quarter, down 37% from a year ago. It said refinances are expected to fall 60% to $308 billion, while purchase mortgages are expected to rise 19% to $381 billion.
Second-quarter originations are expected to show a seasonal bump to $710 billion, but will still be 32% lower than 2021’s second quarter, the MBA said. Refinances will be 65% lower than a year earlier, falling below $200 billion per quarter by the second half.
However, the MBA forecast 12-month gains in purchase originations of nearly 10% in the second quarter and 2% in the second half of 2022.
Fratantoni said he was encouraged that purchase application volume has not declined with higher rates reducing the purchasing power for potential buyers.
“This is particularly auspicious, as we are now in the beginning of the spring home-buying season, and those shopping for homes are struggling with not only higher and more volatile mortgage rates, but also an ongoing shortage of homes on the market,” he said.
The refinance share of mortgage activity decreased to 40.6% of total applications from 44.8% the previous week. The adjustable-rate mortgage share of activity increased to 6.6% of total applications.
The MBA has been conducting its weekly survey of mortgage bankers, commercial banks and thrifts since 1990. It covers 75% of U.S. retail residential mortgage applications.