Mortgage Activity Dips But Loan Amounts Hit Record High

Asian family shaking hands with real estate agent next to house

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The number of mortgage applications may have fallen last week, but the average purchase loan amount climbed to a record high, mirroring the nation’s sizzling home prices in a market with low interest rates, high demand, and very few homes for sale.

For the week through Jan. 22, the average purchase loan amount reached a new record high of $395,200, according to the Mortgage Bankers Association’s (MBA) weekly survey released Wednesday. The MBA has been tracking purchase loan amounts since 1990 and the last record high of $386,500 was for the week through Dec. 25, 2020.

The jump in average loan amounts may reflect an unprecedented lack of inventory as well as borrowers’ ability to finance larger mortgages as interest rates continue to hover near record lows. The National Association of Realtors (NAR) reported last week that at current inventory levels, it would take only 1.9 months for the housing supply to be depleted.

However, overall mortgage activity still fell, which could be a sign of rising rates. The number of mortgage applications for both purchases and refinances fell 4.1% on a seasonally adjusted basis from one week earlier, the MBA said. The unadjusted Purchase Index, a measure of all mortgage applications for purchases of single-family homes, was up 3% from the previous week and 16% year over year.

Looking at its own data, the MBA said the average 30-year fixed mortgage rate rose to 2.95%, its highest level since November, even though all other rates in the survey declined. Freddie Mac, on the other hand, saw the average 30-year fixed mortgage rate drop slightly last week to 2.77% from 2.79% the week prior.

“In a sign that borrowers are increasingly more sensitive to higher rates, large declines in government purchase applications and refinance applications pulled overall activity lower,” Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting, said in a release.

The MBA’s refinancing index also dipped for a second straight week, posting a 5% decline from the prior week, even though it is still 83% higher than the same week last year. The dips come after the MBA’s refinancing index surged 20% for the week ending Jan. 8.