Mortgage demand remains lackluster.
Mortgage application activity has remained at its slowest pace since 1997 as rising interest rates continue to depress demand for home loans.
According to the Mortgage Bankers Association, mortgage application volume dropped 1.7% on a seasonally adjusted basis from the week prior. Unadjusted, applications were down by 2% week over week.
“Mortgage rates increased for the 10th consecutive week, with the 30-year fixed rate reaching 7.16%, the highest rate since 2001,” said MBA deputy chief economist Joel Kan.
Refinance application activity was virtually unchanged, posting a 0.1% gain from the previous week. Consequentially, the refi share of mortgage activity grew five basis points to 28.8%. Meanwhile, purchase applications fell 2% to the slowest rate since 2015 – 42% behind last year’s pace.
“Despite higher rates and lower overall application activity, there was a slight increase in FHA purchase applications, as FHA rates remained lower than conventional loan rates,” Kan said. “MBA’s forecast expects both economic and housing market weakness in 2023 to drive a 3% decline in purchase originations, while refinance volume is anticipated to decline by 24%.”
MBA anticipates total mortgage origination volume to decrease to $2.05 trillion in 2023, down from its $2.26 trillion forecast in 2022.
“MBA’s forecast calls for a recession in the first half of next year, driven by tighter financial conditions, reduced business investment, and slower global growth,” Kan said. “As a result, the unemployment rate will increase from its current rate of 3.5% to 5.5% by the end of the year. Inflation will gradually decline towards the Fed’s 2% target by the middle of 2024.”