Mortgage Applications Experience Decline in Early August

According to the latest Weekly Mortgage Applications Survey by the Mortgage Bankers Association (MBA) for the week ending August 4, 2023, mortgage applications in the United States decreased by 3.1 percent compared to the previous week.

The Market Composite Index, which measures mortgage loan application volume, also decreased by 3.1 percent on a seasonally adjusted basis. Unadjusted, the index showed a 4 percent decrease compared to the previous week.

The Refinance Index saw a 4 percent decrease from the previous week and a 37 percent decrease from the same week one year ago. The seasonally adjusted Purchase Index showed a 3 percent decrease from the previous week, while the unadjusted Purchase Index was 27 percent lower compared to the same week one year ago.

Joel Kan, MBA’s Vice President and Deputy Chief Economist, commented on the increase in rates, stating, “Treasury yields rose last week, and mortgage rates followed suit due to a combination of the Treasury’s funding announcement and the downgrading of the U.S. government debt rating.” Kan also mentioned that the 30-year fixed mortgage rate reached 7.09 percent, the highest level since November 2022, while FHA mortgage rates rose to 7.02 percent, the highest rate since 2002. These higher rates resulted in a decline in mortgage applications, with overall application counts falling for the third consecutive week.

The refinance share of mortgage activity decreased slightly to 28.7 percent of total applications, while the ARM share of activity increased to 6.9 percent.

In terms of the composition of total applications, the FHA share increased to 13.6 percent, the VA share increased to 11.8 percent, and the USDA share decreased to 0.4 percent.

For 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less), the average contract interest rate increased to 7.09 percent, with points increasing to 0.70 for 80 percent loan-to-value ratio loans.

Overall, the data suggests a decline in mortgage applications due to higher rates, which continues to be a challenge for homebuyers facing low inventory and elevated mortgage rates.

There has been an increase in average contract interest rates for various types of mortgages. For 30-year fixed-rate mortgages with jumbo loan balances (greater than $726,200), the interest rate increased to 7.04 percent from 6.89 percent, with points increasing to 0.66 from 0.58 (including the origination fee) for 80 percent LTV loans. Similarly, for 30-year fixed-rate mortgages backed by the FHA, the interest rate increased to 7.02 percent from 6.85 percent, with points increasing to 1.14 from 1.05 (including the origination fee) for 80 percent LTV loans.

Additionally, the average contract interest rate for 15-year fixed-rate mortgages increased to 6.51 percent from 6.39 percent, with points increasing to 0.92 from 0.78 (including the origination fee) for 80 percent LTV loans.

Lastly, the average contract interest rate for 5/1 ARMs increased to 6.36 percent from 6.18 percent, with points increasing to 1.2 from 1.16 (including the origination fee) for 80 percent LTV loans.