Mortgage Lenders And Brokers Are Feeling The Pain As Mortgage Applications Plunge To A 28-Year Low

Mortgage applications plunge to 1995 levels. The Mortgage Bankers Association says that lenders and brokers have witnessed a significant decline of 6.9% from the previous week. This is worst week for originations since 1995.

The MBA’s Market Composite Index has dropped 6.9% from a seasonally adjusted basis just a week before. A closer inspection also reveals a 7% decrease on an unadjusted basis. Refinance loans took a massive hit. They decreased 10% from the previous week. This marks a 12% dip from the same week in 2022.

However, the most startling is the downward trajectory of the Purchase Index. The Purchase Index decreased 6% from one week earlier. When unadjusted, the Purchase Index shows a 5% decline from the previous week. This is a staggering 21% lower than the same week a year ago.

MBA’s Deputy Chief Economist Joel Kan told the media:

“Applications decreased to their lowest level since 1995, as the 30-year fixed mortgage rate increased for the sixth consecutive week to 7.70% – the highest level since November 2000. Both purchase and refinance applications declined, driven by larger drops for conventional applications.

The ARM share was 9.3%, the highest share in 11 months, as some borrowers look for alternative ways to lower their monthly payments. Refinance activity was at its lowest level since early 2023. There is very limited refinance incentive with mortgage rates at multi-decade highs.”

Further dissection of the data also reveals:

• Refinance share of mortgage activity has decreased to 30.5% of total applications from 31.6%  the previous week.
• The ARM share of activity rose to 9.3% of total applications.
• The FHA share of total applications surged to 14.8% from 14.4% the preceding week.
• The VA share also rose, moving to 10.7% from 10.2% the previous week.
• USDA share remains steady at 0.5%.

On the interest rate front:

• The average interest rate for 30-year fixed-rate mortgages with conforming loan balances increased to 7.70%.Jumbo loan balances witnessed a decrease in interest rates, moving to 7.56%.
• 30-year fixed-rate mortgages backed by the FHA saw a slight dip in interest rates, settling at 7.36%.
• 15-year fixed-rate mortgages saw a minuscule increase, landing at 6.98%.
• 5/1 ARMs experienced an uptick, with interest rates moving to 6.52%.

Read more about the slowly imploding mortgage industry on MFI-Miami.