Mortgage Demand Lowest Since Pre-Pandemic

Key Highlights

• Requests for purchase loans dropped -3% from week prior and -2% from one year ago
• Requests for refinance loans dropped -5% from week prior but still +6% over one year ag

Requests for Purchase Loans Down Below Pre-Pandemic Levels

During the last week in May, demand for mortgage applications dropped below pre-pandemic levels.

The Mortgage Bankers Association (MBA) reported that applications for purchase loans fell -3% w/w and -2% from Memorial Day weekend in 2010.

Joel Kan, Associate Vice President of Economic & Industry Forecasting with the MBA, said, “Mortgage applications decreased for the second week in a row, with the overall index reaching its lowest level since February 2020.”

Kan said that this decline in purchase mortgage activity was due to tight housing inventory, rapidly rising home prices and constraints in new home construction.

Lenders Now Charging Point Increases

Despite the fact that rates on 30-year fixed-rate mortgages dropped during this same Memorial Day weekend, lenders are now offsetting the 3.2% rate in May by charging an increase in points, including origination fees.

Kan noted, “Even though rates have been below 3.20% over the past month, they are still around 20-30 basis points higher than the record lows in late 2020.”  

Points increased from 0.35 to 0.39 in 80% of loan-to-value loans.

Refinance Mortgage Applications Also Dropped

Memorial Day weekend 2021 also saw a -3% decline in refinance applications from the week prior.

However, refinance applications continued to see a +6% higher compared to last year during the same week.

The Latest from the MBA

• Rates for 30-year fixed rate mortgages with jumbo loan balances over $548,250 came in at 3.34%
• Rates for 30-year fixed rate FHA mortgages averaged 3.16% – FHA loans represented 9.6% of all mortgage applications
• Rates for 15-year fixed-rate mortgages came in at 2.56% – these 15-year fixed mortgages are popular with homeowners intending to refinance
• Rates for 5/1 adjustable-rate mortgage (ARM) loans averaged 2.54%
• VA loans represented 10.9% of all loans
• Share of USDA loan applications remained flat at 0.4%

According to the latest ICE Mortgage Technology’s Origination Insight Report, average FICO scores on closed loans rose by nearly +20 points last year.

Thanks to Mortgage Bankers Association, ICE Mortgage Technology and Inman.

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