US Mortgage Purchase Applications Fell 9.5% Over the Past 5 Weeks

The recent rebound of mortgage rates has dampened homebuyers’ enthusiasm as suggested by the sharp drop of mortgage purchase applications over the past five weeks.

Sources: Bloomberg, MBA

According to the Mortgage Bankers Association, for the week ending July 28, 2023, mortgage purchase applications decreased by 3.2% on a seasonally adjusted basis from the previous week (v -2.5% prior). The index dropped for a third week and was down 9.5% over the past five weeks.

The decrease in purchase activity can be attributed to various factors, notably including limited housing inventory and the soaring mortgage rates, which are hovering around the 7 percent mark. According to the same report, “the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased to 6.93 percent from 6.87 percent, with points increasing to 0.68 from 0.65 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.” 

As a result, many potential homebuyers are finding it increasingly difficult to afford homes, leading to weaker conventional purchase application volumes. This trend is unlikely to improve in the short term as US Treasury yields rise to fresh 2023 highs this week.

The impact of rising rates was also felt in the refinance market, which recorded a decline of over 30 percent compared to the previous year. Homeowners, wary of the higher rates, are not actively seeking refinancing opportunities.