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Mortgage Applications Decline as Refinancing, Home Purchasing Activity Slows

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Mortgage Applications Decline as Refinancing, Home Purchasing Activity Slows

Mortgage applications in the US declined last week as refinancing and home purchase demand weakened, the Mortgage Bankers Association said Wednesday.

The market composite index, which measures loan application volume, decreased 3.8% in the week ended June 12, compared with the prior week's nearly 11% gain. On an unadjusted basis, applications were down 5% on a weekly basis.

"Last week's (consumer price index) data showed that inflation continued to move higher, putting upward pressure on rates early in the week, but growing optimism regarding the opening of the Strait of Hormuz brought rates down again by the end of the week," said Mike Fratantoni, the MBA's chief economist.

The US and Iran recently agreed to end their war and reopen the crucial Strait of Hormuz after more than three months of conflict that disrupted regional stability and global shipping routes.

Government data from last week showed that annual inflation in the world's largest economy accelerated to 4.2% last month, the highest level in about three years, fueling expectations that the Federal Reserve will keep interest rates on hold for some time.

"The net impact reduced mortgage application activity, with both purchase and refinance application volume down for the week," Fratantoni said.

The refinance index fell 5% from the prior week, while the seasonally adjusted purchase index declined 3%.

Purchase applications remains "modestly" ahead of last year's level, driven by conventional volume, Fratantoni said.

The average interest rate for 30-year fixed mortgages with conforming loan balances of $832,750 or less remained unchanged at 6.6% on a weekly basis. For loan balances higher than that amount, the rate decreased to 6.62% from 6.66%. For 15-year loans, the rate rose to 6.02% from 5.99%.

The share of Federal Housing Administration loans, which are often used by first-time home buyers and can involve smaller down payments, ticked up to 17.5% of total applications from 17.4% the week prior.

On Tuesday, official data showed that housing starts in the US plummeted to the lowest level since 2020 in May, amid a steep drop in multi-family projects.

Homebuilder confidence declined in June as rising material costs and high mortgage rates stoked affordability concerns, the National Association of Home Builders and Wells Fargo said Monday.

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