Average New Mortgage Size Record Set

A couple look at homes for sale in the window of real estate agents William H. Brown.

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Homebuyers are facing one of the most expensive housing markets in history, and that means they need more mortgages than ever before. While mortgage demand is declining, due to rising interest rates, the average purchase loan volume has just set a record.

Mortgage applications to buy a home fell 1% last week compared to the previous week, according to the Bankers Association’s seasonally adjusted Mortgage Index. Trading volume was 7% lower than the same week a year ago.

“Purchase orders saw a slight decrease during the week, with government procurement applications accounting for most of the decline,” said Joel Kahn, MBA economist. “Potential buyers continue to face higher selling prices as well as higher mortgage rates. The heavier mix of traditional applications once again contributed to another record average loan size of $453,000.”

Home prices have risen steadily as demand continues to outpace the supply of homes for sale. And while the increase was moderate at the end of last summer, it is now widening again. Prices nationwide rose 18.5% year-over-year in December, according to the latest report from CoreLogic.

The average contract interest rate for 30-year fixed-rate mortgages with matching loan balances ($647,200 or less) increased to 4.05% from 3.83%, with points up to 0.45 from 0.40 (including origination fees) for 20% loans lower payment. The rate was 107 basis points lower in the same week a year ago.

“Mortgage rates rose across the board last week after the recent rise in Treasury yields, which were up on mounting inflationary pressures and market expectations of more aggressive policy moves by the Federal Reserve,” Kahn added.

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The sharp rise in mortgage rates over the past several months has significantly reduced the demand for refinancing. App volume was down 9% during the week and was 54% lower than the same week a year ago. The share of refinancing of applications decreased to 52.8% of total applications from 56.2% in the previous week. This was the lowest level since July 2019.

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