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Mortgage applications decreased 1.3 percent from one week earlier, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 8, 2022. However, both conventional and government purchase applications increased. The association expects higher interest rates to slow origination growth, but not to crash the market.

“The jump in mortgage rates will slow the housing market and further reduce refinance demand for the rest of this year,” Mike Fratantoni, MBA’s senior vice president and chief economist, said in a statement. “Higher home prices and rates, as well as ongoing supply constraints, are now expected to lead to an annual decline in existing home sales. However, MBA continues to expect purchase originations to reach a new record in 2022.”

Mortgage rates across all loan types continued to climb last week, with the 30-year fixed rate exceeding the 5 percent mark for the first time since November 2018. As a result, refinance activity declined to its slowest weekly page in three years. And “higher rates are increasing borrower interest in ARMs,” Joel Kan, MBA’s associate vice president of economic and industry forecasting. “Their share of applications last week was at 7.4 percent, which was the highest share since June 2019. In a promising sign of strong purchase demand amidst affordability challenges, both conventional and government purchase applications increased.”

Given the faster than expected increase in mortgage rates, and the likelihood of more aggressive actions from the Federal Reserve to curb inflation, MBA’s April 2022 forecast now calls for mortgage originations to total $2.58 trillion in 2022 – a 35.5 percent decline from 2021. Purchase originations are still forecasted to reach a record $1.72 trillion this year – a 4 percent increase from 2021. Refinance originations are now expected to fall 64 percent to $841 billion.