Per the Mortgage Bankers Association’s (MBA) survey through the week ending July 7th, total mortgage activity increased 0.9% from the previous week and the average 30-year fixed-rate mortgage (FRM) rate rose 22 basis points to 7.07%. The FRM rate has risen 30 basis points over the past month and topped 7% for the first time since November of 2022.
The Market Composite Index, a measure of mortgage loan application volume, rose by 0.9% on a seasonally adjusted (SA) basis from one week earlier. Purchasing activity increased 1.7%, while refinancing activity decreased 1.3% week-over-week.
With the Fed indicating that rates will remain higher until inflation has fully cooled, mortgage rates increased to their highest level since November of last year. The higher rates have kept potential buyers on the sideline and greatly diminished the demand for refinancing. The seasonally adjusted purchase index was 26.3% lower than one year ago while the seasonally adjusted refinancing index was 39.3% lower than one year ago.
The refinance share of mortgage activity fell from 27.4% to 26.8% over the week, while the adjustable-rate mortgage (ARM) share of activity rose to 6.6% from 6.2%. The average loan size for purchases was $426,100 in the through the first week of July, down from $426,900 over the month of June. The average loan size for refinancing decreased from $260,700 over the month of June to $254,900 in the first week of July. The average loan size for an ARM was up at start of July to $759,200 while the average loan size for a FRM fell to $353,500.
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Despite rising interest rates, the increase in mortgage activity is a positive sign for the construction loan market. This suggests that there is still strong demand for home construction projects, despite the higher borrowing costs.