According to the Mortgage Bankers Association (MBA), applications for home loans increased by 0.9% for the week ending December 16 compared to the previous week. As per the MBA’s Market Composite Index, a measure of mortgage application volume, the home loan applications surged by 0.9% on a seasonally adjusted basis from the previous week. However, on an unadjusted basis the volume dipped by 1% from the previous week. The refinance index registered an increase of 6% while the purchase index dipped marginally by 0.1% week over week. MBA chief economist Mike Fratantoni doesn’t find the slow response to lower mortgage rates surprising. December is considered as slow month for home buying. He also informed that the 30-year conforming rate reached 6.34% – its lowest level since September. Despite a slight increase in refinancing volume, it was still about 85% lower than the previous year. The refinance share of mortgage activity recorded a nearly 2% increase among the total applications, taking the figure to 31.3%. The adjustable-rate mortgage share decreased to 7.5%.
Fratantoni expects the weakness in demand to continue in 2023 as a recession in the US seems likely. He forecasts an increase in home loan demand if mortgage rates continue to trend down increasing affordability for potential home buyers.