US Mortgage Refinancing and Purchase Applications Rise as Rates Ease

The Mortgage Bankers Association showed mortgage applications in the US rose 7.4% in the week ended February 3rd, 2023, after plunging 9% the previous week. Applications rose for both refinancing (17.7%), though still 75% lower than same week one year ago, and purchases (3.1%), 37% lower than same week one year ago.. Mortgage rates hits their lowest since September last year. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) edged down 1bps to 6.18%. Still borrowers face an ongoing affordability challenge and a low inventory problem.  

mortgage applicaition

Mortgage Bankers Association for the week ending 2 Feb 2023

  • Mortgage applications s.a. +7.4% vs -9.0% prior
  • Refinancing index +18.0%, still 75% lower than same week one year ago. 
  • Refinancing index +3.0%, still 37% lower than same week one year ago. 
  • 30-year mortgage rate 6.18% vs 6.19% prior
United States MBA Mortgage Applications
  • Average loan size on a purchase application increased to $428,500, the largest average since May 2022. This increase is a sign that the recent upward trend in purchase activity remains skewed toward larger loan sizes
  • Less first-time homebuyer activity, as entry level housing remains undersupplied
  • Refinance share of mortgage activity increased to 33.9 percent of total applications from 31.2 percent the previous week.
  • The adjustable-rate mortgage (ARM) share of activity decreased to 6.6 percent of total applications.

““Applications rose last week as the 30-year fixed mortgage rate inched lower to 6.18 percent, its fifth consecutive weekly decline. The 30-year fixed rate is almost a percentage point below its recent high of 7.16 percent in October 2022,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist.

“Both purchase and refinance applications increased last week and have shown gains in three of the past four weeks because of lower rates. Overall applications remained 58 percent lower than a year ago and rates are still significantly higher, however, this week’s results are a step in the right direction. Purchase activity that was put on hold last year due to the quick runup in rates is gradually coming back as rates ease and housing demand remains strong, driven by supportive demographics and the ongoing strength in the job market.””

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%. 

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.

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

From The TradersCommunity News Desk