US Mortgage Applications Fall To The Lowest Level Since December 2019: MBA

US mortgage activity is suddenly slowing down as interest rates climb. The Mortgage Bankers Association (MBA) Mortgage Composite Index showed a sudden drop for the week of February 18, 2022. Seasonally adjusted mortgage application activity dropped 13.1% from the week before. On an unadjusted basis, activity dropped 11% compared to the same week a year earlier. Mortgage application activity breaks down into two distinct segments — purchases and refinancing.

US Mortgage Applications Falls To December 2019 Low

The Mortgage Purchasing index, a.k.a. mortgage applications for home purchases, made a sharp drop recently. Seasonally adjusted applications fell 10% for the week of February 18. Unadjusted applications were 6% lower than the same week last year. “Mortgage applications dropped to their lowest level since December 2019 last week, as mortgage rates continued to inch higher,” said Joel Kan, MBA’s associate VP of forecasting.

Mortgage Applications For Refinancing Fell 56%

The impact of higher mortgage rates really stands out for mortgage refinancing. The seasonally adjusted index fell 16% for the week of February 18, compared to the previous week. The unadjusted index shows a 56% drop compared to the same week a year before. This is an even faster decline than the purchasing index.

“Higher mortgage rates have quickly shut off refinances, with activity down in six of the first seven weeks of 2022,” said Kan.

US mortgage rates are making a sharp climb since hitting record lows a few months ago. A 30-year fixed-rate mortgage backed by the FHA reached 4.06% last week, up a whole point from a year before. Higher prices, smaller loans, and demand pulled forward for the past two years, is catching up. As credit begins to normalize, activity is expected to slow. Credit is still very far away from actually being normalized, but with such extreme lows it can be felt very fast.