Borrowers hoping to take advantage of lower mortgage rates driven by recent economic uncertainty may have missed their window this spring. However, demand for new home purchases remains relatively strong, according to the latest numbers from the Mortgage Bankers Association (MBA).
The Market Composite Index, which the MBA uses to track mortgage loan application volume, declined 1.2 percent on a seasonally adjusted basis for the week ending May 23, while dropping 2 percent on an unadjusted basis.
The good news for mortgage lenders is, despite these recent declines, purchase applications have outpaced last year’s numbers, supported by higher housing inventory in many markets despite the economic uncertainty, as MBA Vice President and Deputy Chief Economist Joel Kan noted in a press release.
The seasonally adjusted Purchase Index increased 3 percent from the previous week in the latest survey and was 18 percent higher than the same week one year prior. Meanwhile, the Refinance Index was 37 percent higher than the same week last year, according to MBA.
Just as notable jumps in mortgage applications that MBA highlighted in April and early May coincided with rate reductions driven by economic volatility, Kan recognized that recent declines in applications occurred as mortgage rates jumped to 6.98 percent in MBA’s latest weekly application survey.
“Mortgage rates reached their highest level since January, following higher Treasury yields. Additional market volatility has added to the increase, keeping the mortgage-Treasury spread wider than it was earlier this year,” Kan said. “As a result of these higher rates, applications activity decreased, driven by a 7 percent decline in refinance applications. Conventional refinances were down 6 percent, and Department of Veterans Affairs (VA) refinances dropped 16 percent.”
The modest 1.2 percent dip in applications followed a more significant 5.1 percent drop the week ending May 16 as mortgage rates hit 6.92 percent.
“Mortgage rates jumped to their highest level since February [the week ending May 16], with investors concerned about rising inflation and the impact of increasing deficits and debt,” MBA Chief Economist Mike Fratantoni said at the time. “Higher rates, including the 30-year fixed rate increasing to 6.92 percent, led to a slowdown across the board. However, purchase applications are up 13 percent from one year ago.”
MBA’s weekly survey covers closed-end residential mortgage applications originated through retail and consumer direct channels.