Demand continues to shrink due to heightened market volatility, expert says.
Home loan application activity decreased for the third consecutive week to another multi-decade low, according to the Mortgage Bankers Association.
MBA’s Market Composite Index, a measure of mortgage application volume, fell 3.7% on a seasonally adjusted basis and 5% on an unadjusted basis from the week prior.
“The 30-year fixed mortgage rate increased for the second week in a row to 5.80%, reaching its highest level since mid-July,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “Mortgage rates and Treasury yields rose last week as Federal Reserve officials indicated that short-term rates would stay higher for longer. Mortgage rates have been volatile over the past month, bouncing between 5.4% and 5.8%.”
The weekly dip was led by an 8% decline in refinance applications, which now comprise only 30% of all applications. Purchase application activity posted a 2% drop and was 23% lower than the same week a year ago.
“Purchase applications have declined in eight of the last nine weeks, as demand continues to shrink due to higher rates and a weaker economic outlook,” Kan said. “However, rising inventories and slower home-price growth could potentially bring some buyers back into the market later this year.”
The FHA share of total applications was up 13% from 12.5% the previous week. The VA share of total applications decreased from 11.6% to 11.1%, and the USDA portion decreased from 0.7% to 0.6%.
In another sign that market volatility has picked up, Kan noted that the average rate on a jumbo loan was 5.32% – 48 basis points lower than for a conforming loan. “This spread reached a high of over 50 basis points in July – and had narrowed – before now widening again,” he said.