Application activity slows as higher interest rates bites.
Mortgage applications fell to their lowest level in a month as interest rates for most loan types rise, the Mortgage Bankers Association reported today.
MBA’s Market Composite Index – a measure of loan application volume – ticked down 4.4% on a seasonally adjusted basis and down 6% when unadjusted. Demand weakened as the average contract interest rate for a 30-year mortgage increased 10 basis points for the week ending June 30.
“As mortgage Treasury spreads remained wide, the 30-year fixed rate increased to 6.85%, the highest rate since the end of May,” MBA deputy chief economist Joel Kan said.
Kan also noted that purchase applications decreased for the first time in a month, down 5% week over week. Refinance application volume declined by 4% from the previous week.
“Rates are still over a percentage point higher than a year ago, and housing affordability is still a challenge in many parts of the country,” Kan added. “However, the average loan size for a purchase application declined to $423,500 – its lowest level since January 2023. This was likely driven by reduced purchase activity in some high-price markets and more activity in some of the lower price tiers as buyers searched for more affordable options.”
In a separate report, MBA found that homebuyer affordability worsened in May. The median loan payment applied for by purchase loan applicants was up to $2,165, a 2.5% month-over-month increase and a 14.1% spike from May 2022.
For borrowers applying for lower-payment mortgages, the national mortgage payment climbed to $1,462 in May.