Mortgage application volumes continued their month-long slide last week, but government lending held up amid current rate volatility, the Mortgage Bankers Association said.
The MBA’s Market Composite Index, a weekly measure of loan application activity based on surveys of the trade group’s members, declined a seasonally adjusted 1.4% for the seven-day period ending June 2. A week earlier, numbers had fallen 3.7%, and compared to the same time frame in 2022, volumes were 32.5% lower. Data was adjusted to account for the Memorial Day holiday.
“Borrowers continue to grapple with the higher rate environment,” said Joel Kan, MBA’s vice president and deputy chief economist, in a press release.
“Mortgage rates declined last week from a recent high, but total application activity slipped for the fourth straight week,” he said.
After rising three weeks in a row and surging to a 2023-high of 6.91% in the most recent survey, the 30-year contract fixed rate for conforming loans with balances below $726,200 backtracked 10 basis points to average 6.81%. Points for 80% loan-to-value ratio loans slid to 0.66 from 0.83.
Meanwhile, the 30-year contract average for jumbo mortgages above the conforming limit also decreased 4 basis points to 6.74% from 6.78% week over week. Borrowers used 0.56 points on average compared to 0.76 seven days earlier.
Both purchases and refinances contributed to the week’s slowdown, according to the MBA. “Purchase activity is constrained by reduced purchasing power from higher rates and the ongoing lack of for-sale inventory in the market, while there continues to be very little rate incentive for refinance borrowers,” Kan said.
The Purchase Index dropped a seasonally adjusted 1.7% compared to the previous week’s survey. The latest numbers also came in 27.1% lower than levels from a year ago. In tandem with home lending overall, purchases decreased for the fourth straight week.
The current home-buying slowdown largely corresponds to the latest data findings from other real estate and banking groups, including Redfin, which last week posted that early indicators of purchase demand, including tours and service requests, have cooled from earlier this spring. A new report from BMO Financial Services also showed almost two-thirds of American consumers plan to wait for rates to drop before entering the housing market. Purchase lock volumes also declined between March and May, according to Black Knight.
The MBA’s Refinance Index also inched down at a slightly slower pace of 0.7% from the previous week, but activity was still 42.3% lower from the reading of a year ago. However, the share of refinance transactions relative to total volume increased to 27.3% from 26.7% seven days earlier, due to a larger pullback in purchases.
Although overall application activity fell last week, federal lending programs helped prop up the market. The seasonally adjusted Government Index increased 1.8% to counter drops in conventional loans, with federally backed activity, likewise, accounting for a larger share of volume.
“There was less of a decline in government purchase applications last week, which was consistent with a growing share of first-time home buyers in the market,” Kan said. While purchases were flat, government refinances saw a 5.6% jump.
Applications guaranteed by the Federal Housing Administration increased their share to 13.2% relative to total activity, compared to 12.7% in the previous survey. Department of Veterans Affairs-backed loans made up 12.5% of volume, rising from 12.1%. But mortgage applications coming through U.S. Department of Agriculture programs took a smaller 0.4% share compared to 0.5% a week earlier.
A higher percentage of government-backed loans, typically taken out for more affordably priced properties, helped shrink application sizes across the board. The average amount reported on new purchase applications decreased 2.2% on a weekly basis to $429,700 from $439,400, falling to its lowest mark since late March.
The mean refinance size similarly fell 2.6% from one week prior to $251,800 from $258,400. The overall average amount recorded across all new applications dropped for the second consecutive week, finishing 2.5% lower at $381,200 compared to $391,000 in the previous survey.
Meanwhile, adjustable-rate mortgages accounted for the same 6.8% slice of activity week over week. While fixed interest rates all came in lower after leaping over 20 basis points in the last survey, ARMs headed upward but still managed to hold their same weekly share.
The contract average rate for the 5/1 ARM, which stays fixed before adjusting to market levels after a half decade accelerated 54 basis points to 5.93% from 5.39% the previous week. Average borrower points surged to 0.96 from 0.46.
But the contract average rate of 30-year FHA-backed mortgages declined to 6.73% from 6.85%, while points decreased to 1.15 from 1.26 for 80% LTV loans.
The 15-year fixed-rate average also saw a double-digit basis point weekly fall, dropping to 6.25% from 6.41%. Points also dropped to 0.62 from 0.84.
