US home loan applications drop for the second straight week.
US mortgage applications fell for the second consecutive week despite a recent drop in mortgage rates, suggesting that tougher economic and financial conditions continue to keep potential home buyers on the sidelines.
Adjusted to the Thanksgiving holiday results, total mortgage application volume dropped 1.9% and was down 36% on an unadjusted basis, according to the Mortgage Bankers Association. Applications continued to trend downward despite the pause in mortgage rate increases in the previous weeks.
“Mortgage applications decreased 2% compared to the Thanksgiving holiday-adjusted results from the previous week, even as mortgage rates continued to trend lower,” said Joel Kan, MBA’s vice president and deputy chief economist. “Rates decreased for most loan products, with the 30-year fixed declining eight basis points to 6.41% after reaching 7.16% in October. The 30-year fixed rate was 73 basis points lower than a month ago – but was still more than three percentage points higher than in December 2021.”
Refinance applications posted a 5% increase – bouncing back from a 13% plunge the week before – while purchase applications slid 3% week over week. Due to rising rates and the slower pace of mortgage application activity, mortgage originations in the third quarter plummeted 62%, with refis driving most of the decline, according to the Milliman Mortgage Default Index (MMDI).
“With interest rates rising, fewer homeowners are refinancing for a more favorable rate or length-of-loan compared to the year prior,” MMDI author Jonathan Glowacki explained.
“Purchase activity slowed last week, with a drop in conventional purchase applications partially offset by an increase in FHA and USDA loan applications,” Kan added. “The average loan size for purchase applications decreased to $387,300 – its lowest level since January 2021. The decrease was consistent with slightly stronger government applications and a rapidly cooling home-price environment.”