Mortgages Applications Rise While Rates Dip, Driving Up Refinancing as Inventory Constrains Purchases

11:19AM ET 12/08/2021 MT Newswires
Mortgage applications rose for the second time in three weeks, while the seasonally adjusted purchase index fell as buyers continued to face a lack of inventory and higher prices and lending rates, the Mortgage Bankers Association said Wednesday.

The market composite index, which measures loan applications, rose 2% for the week ending Dec. 3, after a week-earlier decline of 7.2%, which included an adjustment for Thanksgiving. The refinance index increased 9% from the previous week and was 37% down from a year ago.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances $548,250 or less went down to 3.3% from 3.31% on a weekly basis.

"Mortgage rates declined for the first time in a month, prompting a pickup in refinancing, with government refinances increasing more than 20% over the week," said Joel Kan, MBA's associate vice president of economic and industry forecasting, in a statement.

The average contract interest rate for 30-year fixed-rate mortgages with loan balances of over $548,250 went up to 3.33% from 3.27% in the previous week. Fixed-rate mortgages backed by the Federal Housing Administration tumbled to 3.35% from 3.42%, which Kan said drove the surge in government refinances. Rates on 15-year mortgages dipped to 2.62% from 2.63% a week earlier.

Still, the seasonally adjusted purchase index fell 5% in the week, the MBA said. Without adjustments, the index is up 28%, but is down 8% on an annually basis.

"Activity is still close to the highest level since March 2021, which is a positive sign as the year comes to an end," Kan said. "Purchase activity continues to be constrained by a lack of inventory, combined with rapid rates of home-price appreciation and mortgage rates higher than in 2020."