Buying picked up in early 2022, propelling mortgage volumes to a first-week gain despite steadily rising interest rates, according to the Mortgage Bankers Association.
The MBA's Market Composite Index, a measure of mortgage application activity based on a survey of association members, rose a seasonally adjusted 1.4% for the period ended January 7 from the previous week. The previous week included adjustments for the end-of-year vacation. The seasonally adjusted volume was 40% lower than in the first week of last year.
According to Joel Kan, MBA's associate vice president of economic and industry forecasts, the refinancing index fell 0.1% from seven days earlier, with rising interest rates reducing stimulus. Compared to the first week of 2021, the refinancing volume was 50% lower.
"Although refinancing activity changed little over the week, applications remained at their lowest in over a month and conventional refinancing applications were at their lowest since January 2020," Kan said in a release.
However, sustained high purchasing demand helped offset the refinancing slowdown, with the seasonally adjusted purchasing index rising 2% compared to the previous weekly period. A recent Redfin survey found that the current interest rate environment could push homebuyers to buy in the near future.
"The housing market started 2022 strong," Kan said. "Both conventional and state purchase applications showed gains, with FHA purchase applications increasing nearly 9% and VA applications increasing more than 5%."
Refinancing made up a smaller share of total new lending compared to the previous week, from 65.4% to 64.1%. Adjustable rate mortgages accounted for 3.1% of weekly volume, down from 3.3% seven days earlier.
Average loan amounts for the week increased across all categories, with the average weekly total increasing 1.9% from $331,600 to $338,000. The average purchase mortgage increased just a fraction, from $401,600 to $401,700, while the average refinance amount was $302,300, up 2.6% from $294,600 in the previous weekly period to climb back above the $300,000 mark.
Loans backed by the federal government accounted for a larger portion of activity compared to week-over-week totals. Federal Housing Administration-sponsored mortgages rose to 9.9% of volume from 9.2%. Loans sponsored by Veterans Affairs also rose to 11.4% from 11.3% the previous week, and applications filed through the US Department of Agriculture accounted for the same 0.4% share.
Interest rates have continued their upward trend since late last year, with the corresponding 30-year fixed rate hitting its highest level since May 2020, Kan said. Prices increased across all categories and January also resulted in a new compliant balance of $647,200.
The average contract rate on 30-year fixed-rate mortgages rose 19 basis points to 3.52%, compared with 3.33% a week earlier.
The fixed rate on 30-year jumbo loans with balances in excess of the new compliant amount averaged 3.42%, up from 3.31% in the previous reporting period.
The FHA-backed 30-year fixed income average was also up double digits, to come in at 3.5%, up 10 basis points from 3.4% the previous week.
The average contract rate for 15-year fixed-rate mortgages was 2.73%, up 13 basis points from the 2.6% level seen in the last week of 2021. The 5/1 adjustable-rate mortgage rate was 3.03%, versus 2.45% seven days earlier.