Demand for mortgages dropped during the last week of May to levels not seen since before the pandemic, according to the latest data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey.
After adjusting for seasonal patterns, requests for purchase loans were down 3 percent from the week before, and 2 percent from a year ago (the week of Memorial Day 2020). Demand for refinancing was down 5 percent from the week before, but 6 percent higher than a year ago.
“Mortgage applications decreased for the second week in a row, with the overall index reaching its lowest level since February 2020,” the MBA’s Joel Kan said in a statement. “Tight housing inventory, obstacles to a faster rate of new construction, and rapidly rising home prices continue to hold back purchase activity.”
A slight drop in rates on 30-year fixed-rate mortgages was offset by an increase in points charged by lenders, including the origination fee.
“Even though rates have been below 3.20 percent over the past month, they are still around 20-30 basis points higher than the record lows in late 2020,” Kan said.
The MBA survey reported average rates for the following types of loans during the week ending May 28:
For 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less), rates averaged 3.17 percent, down from 3.18 percent the week before. But with points increasing to 0.39 from 0.35 on 80 percent loan-to-value loans, the effective rate increased from last week.
- Rates for 30-year fixed-rate mortgages with jumbo loan balances (greater than $548,250) averaged 3.34 percent, up from 3.30 percent the week before. With points also increasing to 0.38 from 0.30, the effective rate increased from last week.
- For 30-year fixed-rate FHA mortgages, rates averaged 3.16 percent, down from 3.20 percent the week before. Although points increased to 0.31 from 0.25, the effective rate decreased from last week.
- Rates for 15-year fixed-rate mortgages, which are popular with homeowners who are refinancing, averaged 2.56 percent, up from 2.53 percent the week before. With points also increasing to 0.31 from 0.27, the effective rate increased from last week.
- For 5/1 adjustable-rate mortgage (ARM) loans, rates averaged 2.54 percent, down from 2.81 percent the week before. With points remaining unchanged at 0.29, the effective rate decreased from last week.
The MBA survey showed requests for FHA loans made up 9.6 percent of all applications, up from 9.1 percent the previous week. Applications for VA loans decreased to 10.9 percent from 11.2 percent, while the USDA share of mortgage loan applications remained unchanged at 0.4 percent.
After surging in February and March on inflation fears, mortgage rates retreated in April and remained relatively stable in May. That could change if the Federal Reserve begins discussions on when to taper its $40 billion in monthly mortgage bond purchases, which have helped keep rates low.
Although lenders relaxed standards for refinancing in April, credit remains tighter than before the pandemic for both homebuyers and homeowners seeking to refinance, according to ICE Mortgage Technology’s latest Origination Insight Report, which shows average FICO scores on closed loans rose by nearly 20 points last year.