Mortgage applications fell last week, wiping out the prior week’s gains, as purchase applications dropped to their slowest pace in a month.
The Mortgage Bankers Association’s weekly survey shows the adjusted Market Composite Index – a measure of mortgage loan application volume – decreased by 6.3%, changing course after last week’s 6.3% increase.
Adjusted purchase applications fell by 4.8%, while the unadjusted index was down 5% from the week before and 26% lower YOY.
The average interest rate for 30-year fixed loans rose from 6.48% to 6.57%, its highest level in two months.
Refinances fell 8% from the week prior after a 10% increase last week.
They remain 43% lower than the same time last year, comprising only 27.4% of total applications. In the past decade, refis averaged 58% of total activity.
“Mortgage rates increased last week even as Treasury yields were essentially flat, with the spread between the two rates widening to 310 basis points. Mortgage application activity slowed, as most mortgage rates in the survey increased,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist.
“Purchase applications decreased 5% to its slowest pace in a month, as buyers remain wary of this rate volatility, but also as for-sale inventory in many parts of the country remains scarce.
Affordability-minded buyers have been waiting on the sidelines for rates and home prices to deflate, but they’re not likely to see easing any time soon.
One study found that 5.5% may be the magic rate that gets the housing market moving again.
“Our consulting team has witnessed this across the country, noting that home builders who choose to subsidize buyers’ mortgage rates, bringing the overall rate down below 5.5%, have been achieving the most success,” John Burns and Maegan Sherlock of John Burns Research and Consulting wrote of their findings. “Many of the largest builders in the country have been buying mortgage rates down below 5%.
But rates would have to fall a full point to get there and haven’t shown any serious downward movement, recently fluctuating in the 6% range.
Other key findings include:
-The FHA share of total applications fell from 12.1% to 12% with an average interest rate of 6.39%, down slightly.
-The VA share decreased to 12.2% from 12.9%, and the USDA share remained unchanged at 0.4%.
-ARMs accounted for 6.5% of applications, a decrease, and the rates for these loans jumped from 5.35% to 5.71%
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