Overall mortgage volumes declined during Thanksgiving week as interest rates climbed, but the purchase market sustained its current seasonal momentum, according to the latest data from the Mortgage Bankers Association.

The Market Composite Index, a measure of weekly mortgage applications based on surveys of association members, fell 7.2% on a seasonally adjusted basis for the seven-day period ending Nov. 26. This week’s data included an adjustment for the Thanksgiving holiday. On an unadjusted basis, volume was down 37% week-over-week, while seasonally adjusted activity came in 30% lower from the same week in 2020.

The Refinance Index fell 15% off its level one week earlier, with rising rates taking the air out of refinancing incentive, according to Joel Kan, MBA’s associate vice president of economic and industry forecasting. Refinances also posted a 41% drop compared to the same weekly period last year.

“Over the past three weeks, rates are up 15 basis points and refinance activity has declined over 18%,” Kan said in a press release.

But the recent downturn in refinance activity has been offset to some degree by continued strong demand among home buyers over the past month, with the focus primarily on the higher-priced end of the market. The seasonally adjusted Purchase Index showed application numbers growing for the fourth straight week, climbing 5% from the prior period, largely due to a 6% increase in conventional loans. Unadjusted purchase volume declined 30% from one week prior and was 8% below where it stood in the same week of 2020.

The uptick in conventional mortgages also helped push the average purchase-loan size up for the week “Conventional loans tend to be larger than government loans, and this was evident in the average loan amount, which increased to $414,700 — the highest since February 2021,” Kan said. The mean purchase size grew 1.8% from the previous week, when it came in at $407,200.

“As home-price appreciation continues at a double-digit pace, buyers of newer, pricier homes continue to dominate purchase activity, while the share of first-time buyer activity remains depressed,” Kan added.

The average size of refinance applications stayed close to the same level compared to a week earlier, edging down by 0.2% to $308,100 compared to $308,600. But the activity and growth in home buying led the overall average size during the weekly period to increase by 1.9% to $351,400, up from $345,000 seven days earlier.

Refinances also accounted for its smallest share in application volume in several months — 59.4%, falling below 60% for the first time since April. One week earlier, refinances represented 63.1% of total activity. Adjustable-rate loans took a larger share compared to the prior week, increasing to 3.6% from 3.4%.

Among government loans, mortgages backed by the Federal Housing Administration grew their share to 8.9% relative to overall activity, up from 8.6% the prior week. But Veterans Affairs-sponsored loans edged down to a 10% share compared to 10.3% in the previous reporting period. Loans taken through U.S. Department of Agriculture programs increased to 0.5% of loan volume from 0.4% a week earlier.

Rates continued to rise across the majority of categories last week, when news of the emerging COVID-19 omicron variant only began hitting headlines toward the end of the reporting period.

  • The contract interest rate for the 30-year fixed-rate mortgage with conforming balances of $548,250 or less averaged 3.31%, compared to 3.24% a week earlier. 
  • The average rate for 30-year jumbo fixed rate mortgages with balances greater than $548,250 registered a one-basis-point decrease, dropping to 3.27% from 3.28%.
  • The average contract interest rate for 30-year fixed-rate loans backed by the Federal Housing Administration jumped up 15 basis points week over week to 3.42% from 3.27%.
  • The 15-year fixed-rate mortgage averaged 2.63%, increasing for the third consecutive week. Seven days earlier, the average came in at 2.59%.
  • The average interest rate for the 5/1 adjustable-rate mortgage tumbled to 2.48%, down 52 basis points compared to the previous weekly period, when it stood at 3%.

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