Fewer people were applying for mortgages last week, according to new data from the Mortgage Bankers Association (MBA).
The trade group’s Market Composite Index, a measure of mortgage loan application volume, was down by 8.8% on a seasonally adjusted basis from one week earlier while the unadjusted index dropped by an even 8%.
The seasonally adjusted Purchase Index decreased 10% from one week earlier and the unadjusted index was 9% lower – the latter was also 36% lower than the same week one year ago.
The Refinance Index was 6% below last week’s level and was 56% lower than the same week one year ago. However, the refinance share of mortgage activity inched up to 27.6% of total applications from 27% in the previous week.
Among the federal programs, the FHA share of total applications increased to 12.7% from 12.3%, the VA share of total applications decreased to 11.7% from 12.8% the week prior and the USDA share of total applications remained unchanged at 0.5%.
“Last week’s increase in mortgage rates prompted a pullback in application activity,” said MBA’s Vice President and Deputy Chief Economist Joel Kan. “With more first-time homebuyers in the market, we continue to see increased sensitivity to rate changes. The 30-year fixed rate increased 13 basis points to 6.43%, which led to purchase applications declining 10%.”
Kan added, “Affordability challenges persist and there is limited for-sale inventory in many markets across the country, so buyers remain selective on when they act. The 10% drop in FHA purchase applications, and the increase in the average purchase loan size to its highest level in a month, are other indications that first-time buyers have pulled back. The spread between the jumbo and conforming 30-year fixed rates widened slightly last week to 15 basis points, but this was a much tighter spread compared to the past year. As banks reduce their willingness to hold jumbo loans, we expect this narrowing trend to continue.”
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