Mortgage refis are slowing. Here’s why

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Mortgage applications ticked up 0.2% on a seasonally adjusted basis from a week earlier, but economists have pointed to slowing refinance activity as rates move higher and borrowers see less of an incentive.

"The 30-year fixed rate reached 3.18 percent last week and has risen 15 basis points over the past month, resulting in an 11 percent drop in refinance applications during this time. Government refinance applications fell over 3 percent last week, driven by a decline in FHA refinances and an 8-basis-point increase in the average FHA mortgage rate," Joel Kan, MBA’s associate vice president of economic and industry forecasting, said. 

The Market Composite Index, which compiles all activity, increased 0.4% compared with the previous week.

MORTGAGE APPLICATIONS SHOW RESURGENCE NOT SEEN SINCE APRIL

"Mortgage rates reached their highest level since June 2021, but application activity changed little this week," he added. "An increase in home purchase applications offset a slight decline in refinances. The increase in purchase applications was welcome news, but was primarily driven by a 2 percent gain in conventional purchase applications, which kept the average loan size elevated."

In addition, the MBA reported, the refinance share of mortgage activity decreased to 63.9% of total applications from 64.5% the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 3.4% of total applications.

Despite officials’ expectations of weakening in refinance activity, mortgage applications actually increased 0.2% on a seasonally adjusted basis from one week earlier, a mortgage applications survey reported.

As far as the FHA share of total applications, it decreased to 10.2% from 10.5% the week prior. The VA share of total applications decreased to 10.2% from 10.3% the week prior. The USDA share of total applications decreased to 0.4% from 0.5% the week prior. 

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased to 3.18% from 3.14%, with points increasing to 0.37 from 0.35 (including the origination fee) for 80% loan-to-value ratio (LTV) loans. The effective rate increased from last week. 

Meanwhile, the MBA reported, the average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $548,250) increased to 3.22% from 3.20%, with points increasing to 0.29 from 0.27 (including the origination fee) for 80% LTV loans. The effective rate increased from last week. 

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.20% from 3.12%, with points remaining unchanged at (including the origination fee) for 80% LTV loans. The effective rate increased from last week. 

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The average contract interest rate for 15-year fixed-rate mortgages increased to 2.48% from 2.45%, with points increasing to 0.29 from 0.24 (including the origination fee) for 80% LTV loans. The effective rate increased from last week. 

The average contract interest rate for 5/1 ARMs increased to 3.08% from 2.54%, with points increasing to 0.26 from 0.16 (including the origination fee) for 80% LTV loans. The effective rate increased from last week. 

The survey covers over 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990.

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