The impact of rising mortgage interest rates is still being felt, particularly in the refinance market. According to the Mortgage Bankers Association’s seasonally adjusted index, total mortgage application volume declined 2.8 percent last week compared to the prior week.
For 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less), the average contract interest rate climbed to 3.20 percent from 3.16 percent, with points increasing to 0.43 from 0.34 (including the origination charge) for loans with a 20% down payment.
As a result, refinance demand dropped 5% week over week and was 31% lower than the same period a year ago. In seven of the last eight weeks, refinance applications have decreased. The refinance share of all mortgage applications fell to 62.9 percent from 63.5 percent the previous week.
Joel Kan, MBA’s associate vice president of economic and industry forecasting speaking on the development said, “activity has been particularly sensitive to rate movements, and last week’s decline was driven by a drop in conventional and FHA refinance applications, which offset an increase in VA refinance applications.”
Mortgage applications for house purchases, which are less affected by weekly rate changes, increased 2% this week but were 6% lower than the same week a year ago. After a temporary lull, buyers appear to be returning to the market. In a sentiment study released this week by the National Association of Home Builders, builders reported robust buyer traffic.
“Purchase applications increased for both conventional and government loan segments, as housing demand continues to show resilience at a time – late fall – when home buying activity typically slows. The second straight increase in purchase applications suggests that stronger sales activity may continue in the weeks to come,” said Kan.
Mortgage rates have risen steadily this week, reaching their highest level in more than three weeks. A report on October retail sales, which jumped 1.7 percent, making it the best month in several years, affected rates on Tuesday.
Commenting on the market trend, Matthew Graham, chief operating officer at Mortgage News Daily, said, “In general, strong economic data puts upward pressure on rates. Economists were only expecting a 1.4% increase after last month’s 0.8% improvement.”