Mortgage Applications Fall as Interest Rates Tick Up

Mortgage Weekly Update

Mortgage applications were down last week, dropping about 2% from the week prior, according to the latest survey from the Mortgage Bankers Association (MBA). The overall drop came from a decline in refinance applications, which fell 5% for the week. Purchase applications actually increase over the week prior, with a 3% jump.

The decline was likely a result of rising mortgage rates, which average 2.92% on 30-year loans last week. That’s up from last week’s 2.88% and the highest rate since November 2020. 

“After a post-holiday surge of refinances, higher rates chipped away at demand,” said Joel Kan, associate vice president of economic and industry forecasting at MBA. 

Rates are rising due to income economic stimulus, according to Kan.

“Market expectations of a larger than anticipated fiscal relief package, which is expected to further boost economic growth and lower unemployment, have driven Treasury yields higher the last two weeks,” he said.

Despite the higher rates, homebuyers were still busy. Purchase loan activity was up 15% over the year, and the average loan size jumped, too, hitting $384,000 — the second highest size on record.

More in mortgage and housing news

  • The share of mortgage loans in forbearance fell to 5.37% this week — down from 5.46% of all loans last week. According to MBA, about 2.7 million homeowners are still on a forbearance plan.
  • The Federal Housing Finance Agency extended its foreclosure and REO eviction moratorium until February 28. The measure protects homeowners in properties financed with a Fannie Mac- or Fannie Mae-owned loan, as well as tenants in rental properties owned by the GSEs (due to foreclosure or deeds-in-lieu of foreclosure). 
  • Applications to purchase new construction were up 42.2% in December (over December 2019). According to MBA, the three-month average of new home sales last year was around 796,000 — up from the 717,000 seen in 2019.

This week in mortgage rates

Mortgage rates rose on all loan products this week. It was the first time in seven weeks that 15-year fixed rates have seen an increase.

Here’s how rates looked for each loan type:

Make sure to check back here next week for the latest mortgage news.

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Aly Yale

Aly J. Yale is a freelance writer focusing on real estate, mortgage, and the housing market. Her work has been featured in Forbes, Bankrate, The Motley Fool, Business Insider, The Balance, and more. Prior to freelancing, she served as an editor and reporter for The Dallas Morning News. She graduated from Texas Christian University's Bob Schieffer College of Communication with a major in radio-TV-film and news-editorial journalism. Connect with her at AlyJYale.com or on Twitter at @AlyJwriter.