M Mortgage

US Mortgage Purchase Applications Fell 12% Over the Past 6 Weeks

10 August, 2023
30-Year-fixed-rate mortgage-us-mortgage-purchase-applications

US homebuyers’ enthusiasm has beeen dampened by the spike of mortgage rates as suggested by the sharp decline of mortgage purchase applications over the past six weeks.

According to the Mortgage Bankers Association (MBA), for the week ending August 4, 2023, mortgage purchase applications decreased by 2.7% on a seasonally adjusted basis from the previous week (v -3.2% prior). The index dropped for a fourth straight week and was down 12% over the past six weeks. It reached the lowest level since February.

The decrease in purchase activity can be attributed to various factors, notably including limited housing inventory and the soaring mortgage rates. Last week, Bankrate.com data showed 30-year mortgage rates hit the highest level in 23 years.

In the meantime, according to the the MBA report, “Treasury yields rates rose last week and mortgage rates followed suit due to a combination of the Treasury’s funding announcement and the downgrading of the U.S. government debt rating. Rates increased for all loan types in our survey, with the 30-year fixed mortgage rate increasing to 7.09 percent, the highest level since November 2022”.

In a separate report, MBA found that mortgage credit availability decreased in July. It shows Mortgage Credit Availability Index (MCAI) fell by 0.3 percent to 96.3 in July. “A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. The index was benchmarked to 100 in March 2012. The Conventional MCAI decreased 0.5 percent, while the Government MCAI decreased by 0.1 percent. Of the component indices of the Conventional MCAI, the Jumbo MCAI decreased by 0.8 percent, and the Conforming MCAI rose by 0.2 percent.

As a result, many potential homebuyers are finding it increasingly difficult to afford homes, leading to weaker conventional purchase application volumes. This situation is expected to have a significant effect on closed sales from August to October. This could potentially lead to existing home sales reaching a 13-year low.