Interest in residential mortgage loans fell 8.1% for the week ending March 18 as mortgage rates rose to 4.5%, the highest level in years, according to the Mortgage Bankers Association‘s latest survey.
“The jump in rates comes as markets moved to price in a much faster pace of rate hikes, as well as expectations of fewer MBS purchases from the Federal Reserve,” Joel Kan, associate vice president of economic and industry forecasting for the MBA, said in a statement.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $647,200) increased to 4.50% from 3.27%, with points increasing to 0.59% from 0.54% (including the origination fee) for 80 percent LTV loans. The 23 basis points increase last week was the largest weekly change since March 2020.
Higher rates have significantly impacted the refinance activity, both for conventional and government loans. According to the MBA, refi applications fell 14.3% from the prior week and were down 54.2% from a year ago.
Meanwhile, the seasonally adjusted purchase index decreased 1.5% from one week earlier and was 12% lower year-over-year. According to Kan, purchase FHA and VA applications had a larger drop, compared to a small decline in purchase conventional apps.
“First-time homebuyers, who rely on these government programs, are increasingly challenged by both the rapid increase in home prices and higher mortgage rates,” he said. “Repeat homebuyers, who are more likely to use conventional loans, benefit from the gains in home equity realized on a sale which can be used to fuel their next purchase, even with rates moving higher.”
The MBA found that the refi share of mortgage activity decreased to 44.8% of total applications last week, from 44.8% the previous week. The adjustable-rate mortgage share of the activity increased from 5.6% to 6.4% of total applications. The FHA share of total applications went from 8.7% to 8.8%, and the share of VA applications decreased from 10.5% to 9.8%.