Mortgage Applications Decline 1% Amidst Lower Refinancing

Mortgage applications in the United States saw a 1% decrease on a seasonally adjusted basis, according to the Mortgage Bankers Association (MBA) Weekly Mortgage Applications Survey released on March 6, 2024. This overall dip was primarily driven by a 2% decline in the refinance index, which measures the volume of mortgage applications for refinancing existing loans. The MBA's survey, which tracks application data from approximately 75% of the U.S. retail residential mortgage market, indicates a continued cooling in borrowing activity. The refinance index has now fallen for several consecutive weeks, suggesting that fewer homeowners are opting to refinance their mortgages, likely due to prevailing interest rate conditions. The MBA's refinance index stood at 1,042.5, down from 1,063.8 in the previous week. The adjustable-rate mortgage (ARM) share of mortgage activity decreased to 7.1% of applications, down from 7.4% in the prior week. Meanwhile, the share of cash-out refinances also decreased to 63.7% from 64.4% week-over-week. Concurrently, the seasonally adjusted purchase index, which gauges mortgage applications for the purchase of new homes, experienced a more significant decline, falling by 1% from the previous week. On an unadjusted basis, the purchase index was 15% lower than the same week one year ago, indicating a substantial year-over-year decrease in home buying activity. The MBA's data suggests that higher mortgage rates continue to dampen demand for home purchases. The average contract interest rate for 30-year fixed-rate mortgages (FRMs) with loan-to-value ratios of 75% or less was 7.05%, up from 7.00% in the previous week. This increase in average rates, even by a small margin, can make borrowing more expensive for prospective buyers. The MBA's survey also noted that the average loan size for new purchase mortgages decreased to $356,600 from $361,300 in the week prior. The average loan size for all mortgages, including refinances, also decreased to $318,900 from $323,900. These figures reflect a market where both refinancing and new home purchases are facing headwinds, with higher borrowing costs and potentially tighter lending standards contributing to the subdued activity. The MBA's survey is a key indicator of trends in the U.S. housing finance market, providing insights into borrower behavior and the overall health of the mortgage industry.