Purchase loans drive mortgage applications higher

Purchase loans drive mortgage applications higher
Mortgage applications climbed 1.4% for the week ending Jan. 7, 2022, according to a survey published by the Mortgage Bankers Association this week. The growth was buoyed by a 2% increase in the trade group’s seasonally adjusted purchase index, the MBA said.

Per the report, the unadjusted purchase index increased 51% compared to the previous week but was 17% lower than the same week one year ago.

On the refinance front, the trade group’s refi index dipped by 0.1% from the previous week, coming in 50% lower than the same week one year ago.

Joel Kan, associate vice president of economic and industry forecasting at the MBA, said in a statement that the increase in mortgage rates is curtailing refinance activity.

“Mortgage rates increased significantly across all loan types last week as the Federal Reserve’s signaling of tighter policy ahead pushed U.S. Treasury yields higher,” Kan said. “Rates at these levels are quickly closing the door on refinance opportunities for many borrowers.”

As evidence, the report found that the refi share of mortgage activity fell to 64.1 % of total applications from 65.4% the previous week.

The trade group noted that refi applications are at their lowest level in over a month, while conventional refi applications were at their lowest level since January 2020.  

Adjustable-rate mortgage (ARM) share of activity dipped to 3.1 % of total loan applications.

Meanwhile, the share of total applications that made up FHA and VA loans grew to 9.9% and 11.4%, respectively. The USDA share of total applications remained unchanged from 0.4% the week prior, the MBA said.

The trade group remarked that it “expects solid growth in purchase activity this year, as demographic drivers and the strong economy support housing demand. However, the strength in growth will be dependent on housing inventory growing more rapidly to meet demand,” said Kan.

Here is a more detailed breakdown of this week’s mortgage applications data:

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances($647,200 or less) increased to 3.52% from 3.33%.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $647,200) increased to 3.42% from 3.31%.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.50% from 3.40%.

The average contract interest rate for 15-year fixed-rate mortgages increased to 2.73% from 2.60%.

The average contract interest rate for 5/1 ARMs increased to 3.03% from 2.45 percent%.
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