Mortgage applications decreased 2.7 percent from two weeks earlier, according to data from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey for the week ending December 31, 2021. The results include adjustments to account for the holidays.

The Market Composite Index, a measure of mortgage loan application volume, decreased 2.7 percent on a seasonally adjusted basis from two weeks earlier. On an unadjusted basis, the Index decreased 32 percent compared with the two weeks ago. The holiday adjusted Refinance Index decreased 2 percent from the two weeks ago and was 40 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 4 percent from two weeks earlier. The unadjusted Purchase Index decreased 32 percent compared with the two weeks ago and was 12 percent lower than the same week one year ago.

"Mortgage rates continued to creep higher over the past two weeks, as markets maintained an optimistic view of the economy. The 30-year fixed rate increased 6 basis points to 3.33 percent - the highest since April 2021. The higher rates to close 2021 caused refinance activity to decrease 2.2 percent. Refinance demand continues to dwindle, as many borrowers refinanced in 2020, and in early 2021 - when mortgage rates were around 40 basis points lower," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "The purchase market also finished the year on a slower note, with the final week coming in at the weakest since October 2021. Even though average loan sizes were lower, home-price appreciation remains at very high levels."

Added Kan, "Despite supply and affordability challenges, 2021 was a record year for purchase originations. MBA expects 2022 to be even stronger, with total purchase activity reaching $1.74 trillion."

While the index changes were calculated relative to two weeks prior, the following compositional and rate measures are presented relative to the previous week only.

The refinance share of mortgage activity increased to 65.4 percent of total applications from 63.9 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 3.3 percent of total applications.

The FHA share of total applications increased to 9.2 percent from 8.5 percent the week prior. The VA share of total applications decreased to 11.3 percent from 11.4 percent the week prior. The USDA share of total applications remained unchanged from 0.4 percent the week prior.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased to 3.33 percent from 3.31 percent, with points increasing to 0.48 from 0.38 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate increased from last week.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $548,250) decreased to 3.31 percent from 3.35 percent, with points increasing to 0.38 from 0.34 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.40 percent from 3.39 percent, with points increasing to 0.42 from 0.37 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.

The average contract interest rate for 15-year fixed-rate mortgages remained unchanged at 2.60 percent, with points increasing to 0.31 from 0.29 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.

The average contract interest rate for 5/1 ARMs decreased to 2.45 percent from 2.74 percent, with points increasing to 0.33 from 0.22 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.