Mortgage volume drops again after a one-week surge

Following a seasonally adjusted spike that lasted one week, mortgage application volume declined again, with purchases slowing, according to the Mortgage Bankers Association.

The MBA’s Market Composite Index, which tracks application volume through a survey of members, declined 4% on a seasonally adjusted basis for the week ending June 16, compared to the prior period that included the July 4th holiday. The unadjusted index came in 20% higher for the week. Volume showed a seasonally adjusted 17.7% decrease from the same week a year ago.

Both purchases and refinancing activity dropped. The Refinance Index fell 3% compared to the previous week and was 18% lower than the same week in 2020. The seasonally adjusted Purchase Index declined 6% week over week, but on an unadjusted basis, rose 17%. The unadjusted Purchase Index was 18% lower than its level in the same week a year ago.

“On a seasonally adjusted basis compared to the July 4th holiday week, mortgage applications were lower across the board, with purchase applications back to near their lowest levels since May 2020,” said Joel Kan, the MBA's associate vice president of economic and industry forecasting, in a press statement. Limited inventory and high prices kept potential buyers out of the market, according to Kan.

Refinances accounted for 64.9% of total application volume, up from 64.1% the prior reporting period. “Refinance activity fell over the week, but because rates have stayed relatively low, the pace of applications was close to its highest level since early May 2021,” Kan noted.

The share of adjustable-rate mortgage applications dropped compared to the previous week, edging down two basis points to 3.3% from 3.5%.

Average loan size falls slightly, even as purchases climb back above $400K
The average mortgage application size decreased slightly, down 0.6% to $343,800 from $345,900 the previous week. The average size of refinances also dipped, declining 1.2% to $312,600, compared to $316,300 a week earlier. But the average value of purchase mortgages crept back up above the $400,000 mark, climbing to $401,300 from the prior period's $398,600, an increase of 0.7%.

Applications coming through government-backed programs took a larger week-over-week share. Federal Housing Authority-sponsored mortgages accounted for 9.6% of total volume, compared to 9.5% the prior week. Veterans Administration-backed loans represented 10.5% of all mortgage applications, up from 10.3% week over week, while the percentage of loans applied for via U.S. Department of Agriculture programs remained unchanged at 0.5%.

30-year conforming rate climbs, while others fall
News regarding coronavirus variants showed that worries about the pandemic were still playing a large role in the mortgage market.

“The 10-year Treasury yield dropped sharply last week, in part due to investors becoming more concerned about the spread of COVID-19 variants and their impact on global economic growth,” said Kan. “There were mixed changes in mortgage rates as a result.”

• The average contract interest rate of 30-year fixed-rate mortgages with conforming loan balances of $548,250 or less climbed on a week-over-week basis, up to 3.11% from 3.9%.

• The contract interest rate of 30-year fixed-rate jumbo loans with balances greater than $548,250 dropped three basis points to 3.13%, compared to 3.16% a week earlier.

• The average contract interest rate of 30-year fixed-rate mortgages backed by the FHA decreased again, falling to 3.08% from 3.15% the previous week.

• The average contract interest rate of 15-year fixed-rate mortgages also dropped two basis points, down to 2.46% from 2.8% one week earlier.

• The interest rate for 5/1 adjustable-rate mortgages dipped to 2.74%, a week after climbing to 3.02%.