US Mortgage Applications Fall 5.4% With Ongoing Affordability Challenge and Low Inventory

The Mortgage Bankers Association showed mortgage applications in the US w/e. 1 July fell 5.4% after rising 0.7% the prior week. The Refinance Index decreased 7.7% from the previous week and was 76% lower than the same week one year ago, as homeowners still have reduced incentive ahead of more Fed rate rises. The seasonally adjusted Purchase Index fell 4.3% from the previous week and 7.8% compared to the same week in the previous year because borrowers face an ongoing affordability challenge and a low inventory problem.  

mortgage applicaition

The average long-term mortgage rate fell 10 basis points last week and have declined 24 basis points in the last two weeks to 5.74% as it corrects from the highest rate since November 2008. The 30-year mortgage rate has been rising with yields with higher house prices in general.

Mortgage Bankers Association for the week ending 1 July 2022

  • US MBA mortgage applications w.e. 7 July -5.4% vs Prior +0.7%
  • Market index 305.30 vs 320.4 prior
  • Purchase index 232.6 Prev: 242.8 prior
  • Refinancing index 670.3 vs 726.7 prior
US MBA Mortgage Applications
  • 30-year mortgage rate 5.74% Prev: 5.84% prior
  • Jumbo mortgage loans (greater than $647,200) 5.28% Prev: 5.42% prior
  • Refis were 29.6% of total applications last week, decreasing from 30.3% previous week (22 year low)
  • The adjustable-rate mortgages (ARM) share of applications declined from 10.1% to 9.5%,
  • MBA said average interest rate for a 5/1 ARM fell to 4.62% from 4.64% a week prior
  • The FHA share of total applications remained unchanged at 12%.
  • The V.A. share went from 11.2% to 11.1%.
  • The USDA share of total applications remained at 0.6%. 

“Mortgage rates decreased for the second week in a row, as growing concerns over an economic slowdown and increased recessionary risks kept Treasury yields lower,” Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in a statement. But he added: “Rates are still significantly higher than they were a year ago, which is why applications for home purchases and refinances remain depressed.”

This year’s surge in mortgage rates was hardly unforeseen, given the record lows reached in the pandemic period and concerns about high U.S. inflation readings, but it has unfolded faster than many expected. At the beginning of the year, the average rate on America’s most popular home loan was 3.22%. 

A 22yr low in MBA refinancings as a % of total Mortgage applications

The MBA estimates the average contract 30-year fixed-rate mortgage for conforming loans ($647,200 or less) decreased to 5.74%, from 5.84% the previous week, falling 24 basis points during the past two weeks. Jumbo mortgage loans (greater than $647,200) went from 5.42% to 5.28%. Another index, the Freddie Mac PMMS, showed purchase mortgage rates dropped 11 basis points last week to 5.70%, ending a two-week climb. 

Higher mortgage rates typically slow home-buying activity, but the number of applications. Expectations that the Federal Reserve will raise interest rates several more times this year to control inflation are driving up mortgage rates. Home prices continue to push homeownership out of the question for many Americans.

Things are different to the 2008 bubble pop however, total mortgage debt in the United States is now less than 43% of current home values, the lowest on record. Negative equity is virtually nonexistent, compare that to the more than 1 in 4 borrowers who were under water in 2011. Just 2.5% of borrowers have less than 10% equity in their homes.


There are currently 2.5 million adjustable-rate mortgages, or ARMs, outstanding today, or about 8% of active mortgages. The adjustable-rate mortgages (ARM) share of applications declined from 10.1% to 9.5%. MBA said average interest rate for a 5/1 ARM fell to 4.62% from 4.64% a week prior

That is the lowest volume on record. ARMs can be fixed, usually for terms of five, seven or 10 years.

In 2007, just before the housing market crash, there were 13.1 million ARMs, representing 36% of all mortgages.

Rising rates are reducing home-loan refinancings, which powered much of the mortgage market’s boom in 2020 and 2021. About four million refinancings were expected to make up 33% of mortgage originations this year, down from 59% in 2021, according to the Mortgage Bankers Association.

The survey covers over 75 percent of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks, and thrifts. Base period and value for all indexes is March 16, 1990=100. 

Source: Mortgage Bankers Association of America

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