Demand for purchase mortgages was down 17 percent last week compared to the same time a year ago, as mortgage rates climbed to their highest level since 2009, according to a weekly survey of lenders by the Mortgage Bankers Association.

Thirty-year fixed-rate conforming mortgages rose, on average, to 5.37 percent, up from 5.20 percent a week earlier while rates for 15-year fixed-rate mortgages averaged 4.68 percent, up from 4.44 percent the week previous.

Data released Wednesday from the MBA’s Weekly Applications Survey showed that after adjusting for seasonal factors, demand for purchase mortgages was down 8 percent week-over-week.

Joel Kan

“Prospective homebuyers have pulled back this spring, as they continue to face limited options of homes for sale along with higher costs from increasing mortgage rates and prices,” MBA forecaster Joel Kan said in a statement. “The recent decrease in purchase applications is an indication of potential weakness in home sales in the coming months.”

Rising mortgage rates are having an even more dramatic impact on refinancing, with the MBA survey showing demand for refinancing falling 9 percent last week when compared to the previous week, and 71 percent from the same week a year ago. Requests to refinance accounted for 35 percent of applications.

Kan said that with mortgage rates increasing by 1.5 percentage points over the last three months, some borrowers are coping by applying for adjustable-rate mortgages (ARMs). ARM loans typically have a lower introductory rate than fixed-rate mortgages, but that rate can go up or down an introductory period that typically lasts for three to seven years.

The MBA survey found that ARM loans accounted for 9 percent of mortgage loan applications last week — double the share they commanded just three months ago. Because borrowers seeking ARM loans tended to apply for bigger loans — $728,900, on average, compared to $359,000 for borrowers requesting fixed-rate mortgages — ARM loans represented 17 percent of the dollar volume borrowers applied for last week.

For the week ending April 22, 2022, the MBA reported average rates for the following types of loans:

• For 30-year fixed-rate conforming mortgages (loan balances $647,200 or less), rates averaged 5.37 percent, up from 5.20 percent the week before. With points increasing to 0.67 from 0.66 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans, the effective rate also increased.
• Rates for 30-year fixed-rate jumbo mortgages (loan balances greater than $647,200) averaged 4.89 percent, up from 4.76 percent the week before. Although points increased to 0.47 from 0.46 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.
• For 30-year fixed-rate FHA mortgages, rates averaged 5.29 percent, up from 5.11 percent the week before. Although points decreased to 0.88 from 0.90 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.
• Rates for 15-year fixed-rate mortgages averaged 4.68 percent, up from 4.44 percent the week before. With points increasing to 0.80 from 0.77 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.
• For 5/1 ARMs, rates averaged 4.28 percent, up from 4.09 percent the week before. With points increasing to 0.74 from 0.56 (including the origination fee) for 80 percent LTV loans, the effective rate also increased from last week.

In an April 19 forecast, Fannie Mae economists said they expect higher mortgage rates and other factors are likely to cause home sales to decline by 7.4 percent this year and by 9.7 percent in 2023.

Fannie Mae forecasters now expect lenders will refinance $889 billion in mortgages this year, which would represent a 68 percent drop from the $2.8 trillion in mortgages refinanced in 2020.