Mortgage rates double vs. year ago, refinancings hit 22-year low: survey

While mortgage rates continue to reach multi-year highs each week, reports show mortgage loan applications and refinance applications are plummeting in response to "economic uncertainty."

Data gathered by the Mortgage Bankers Association's Weekly Mortgage Applications Survey showed mortgage loan applications decreased 3.7% on a seasonally adjusted basis for the week ending Sept. 23 compared to the previous week. On an unadjusted basis, the Market Composite Index decreased 4% compared with the previous week.

The Refinance Index decreased 11% from the previous week and was 84% lower than the same week one year ago.

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The seasonally adjusted Purchase Index decreased 0.4% compared to the previous week, while the unadjusted Purchase Index decreased 1%, making it 29% lower than this time last year.

"With rates now more than double what they were a year ago, the pace of refinancing is running at a 22-year low and last week was more than 80 percent below last year’s level," said MBA’s Associate Vice President of Economic and Industry Forecasting Joel Kan. "Similarly, purchase activity was 29 percent lower than a year ago, with higher rates and economic uncertainty weighing on buyers’ decisions."

Kan said the application decline comes after "aggressive policy measures" from the Federal Reserve to bring down inflation. In addition to the decline, uncertainty surrounding the Fed’s reduction of its MBS and Treasury holdings is adding to the volatility in mortgage rates.

After a pause in July, mortgage rates increased more than a percentage point over the past six weeks. At the end of the Sept. 23 week, the 30-year fixed rate was 6.52%, which is the highest it has been since mid-2008.

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The refinance share of mortgage activity decreased to 30.2% of total applications, as opposed to 32.5% from the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 10.4% of total applications.

"With the recent jump in rates, the ARM share reached 10 percent of applications and almost 20 percent of dollar volume," Kan said. "ARM loans remain a viable option for qualified borrowers in this rising rate environment."

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FHA applications decreased from 13.3% to 12.5% in the past week, while VA applications decreased from 10.9% to 10.7%. The USDA share of total applications went without change, holding at 0.6% over the past two weeks.

For conforming loan balances of $647,200 or less, the average contract interest rate for 30-year fixed-rate mortgages increased from 6.25% to 6.52%. Points increased from 0.71 to 1.15, including the origination fee, for 80% of loan-to-value ratio loans. The effective rate also increased.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances greater than $647,000 also increased from 5.79% to 6.01%. Points increased from 0.46 to 0.7, including the origination fee, for 80% of loan-to-value ratio loans. The effective rate also increased.

An increase was also seen in the average contract interest rate for 30-year fixed-rate mortgages backed by the FHA, moving from 5.85% to 6.17%. Points increased from 1.15 to 1.31, including the origination fee, for 80% of loan-to-value ratio loans. The effective rate also increased.

The average contract interest rates for 15-year fixed-rate mortgages also increased from 5.40% to 5.70%, with points increasing to 1.33 from 1.06, including the origination fee, for 80% loan-to-value ration loans. The effective rate also increased from the previous week.

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Lastly, the average contract interest rate for 5/1 ARMs increased from 5.14% to 5.30%. Points increased from 0.99 to 1.28, including the origination fee, for 80% of loan-to-value ratio loans. The effective rate also saw an increase over the week.