Fewer prospective homebuyers were on the hunt for home loans last week while jumbo mortgages fell out of favor with many lenders, according to the Mortgage Bankers Association (MBA).
The trade group’s Market Composite Index was down by 1.2% on a seasonally adjusted basis from the previous week and down by 0.4% on an unadjusted basis. The seasonally adjusted Purchase Index decreased 2% from one week earlier while the unadjusted index took a 1% dip and was also 32% lower than the same week one year ago.
The Refinance Index popped up by 1% but was also 51% lower than the same week one year ago. The refinance share of mortgage activity increased to 27.2% of total applications from 26.8% in the previous week.
The refinance share of mortgage activity increased to 27.2 percent of total applications from 26.8 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 7.3 percent of total applications.
Among the federal programs, the FHA share of total applications decreased to 12.5% from 12.6% while the VA share of total applications increased to 11.3% from 11.2% and the USDA share of total applications increased to 0.5% from 0.4%.
Joel Kan, MBA’s vice president and deputy chief economist, blamed elevated mortgage rates for driving down purchase loan activity and weakening the refinance side of the business. He also observed a troubling trend involving the XL-sized home loans.
“The jumbo-conforming spread continues to narrow, an indication that there is reduced lender appetite for jumbo loans following the recent turmoil in the banking sector and heightened concerns about liquidity,” he said. “The spread was 13 basis points last week, after being as wide as 64 basis points in November 2022.”