The highest interest rates in a month prompted a setback to the mortgage market last week. Total mortgage application volume—which includes applications for home purchases and refinancing—dropped 0.5 percent on a seasonally adjusted basis, the Mortgage Bankers Association reported Wednesday. The more telling part, however, is that volume is now 21.5 percent lower than a year ago.
Higher interest rates had a big impact on refinancing applications last week, which dropped 4 percent; applications are now 36 percent lower than a year ago when interest rates were nearly half a percentage point lower.
The 30-year fixed-rate mortgage averaged 4.11 percent last week, up from 4.04 percent the week prior. “Mortgage rates increased to their highest levels in almost a month following a relatively hawkish Fed statement last week, driving the decline in refinance activity,” says Joel Kan, an MBA economist. “The FOMC announced the start of its plan to reduce the size of its balance sheet and indicated plans to increase short-term rates one more time this year.”
However, applications for home purchases proved to be more rate-proof last week and increased 3 percent week over week. Applications for home purchases are now 4 percent higher than the same week a year ago. Factors other than rates appeared to have more of an impact on that portion of mortgage volume, according to the MBA.
“Purchase applications increased slightly last week, but were still weighed down by tight inventories of homes for sale and lingering effects from the hurricanes,” Kan says. Mortgage application volume in Florida and Texas remained well below averages of last year.
Source: “Weekly Mortgage Applications Fall as Interest Rates Rise to Highest Level in a Month,” CNBC (Sept. 27, 2017)
