Mortgage interest rates have inched higher for five consecutive weeks, and the increase in borrowing costs are taking a toll on loan demand — particularly in the refinance market.
Total mortgage application volume, reflecting refinancings and home purchases, dropped 1.2 percent on a seasonally adjusted week-to-week basis, the Mortgage Bankers Association reported Wednesday. The 30-year fixed-rate mortgage, meanwhile, moved up again last week to its highest average since June. The 30-year fixed-rate mortgage averaged 3.77 percent, MBA reports.
“Economic news in recent weeks has been mostly positive, especially in terms of GDP growth and increasing wages,” says MBA economist Joel Kan. “This raises the likelihood of the Fed raising rates at its December meeting but also indicates stronger domestic economic fundamentals, which pushes rates higher.”
Refinance applications dropped 3 percentage points last week, settling on the lowest level since May. On the other hand, mortgage applications for home purchases saw a 1 percent gain during the week and are 11 percent higher than the same week a year ago, MBA reports.
“Applications for home purchase loans increased for only the second time in the past six weeks, but purchase activity in 2016 has generally been stronger than in 2015,” Kan says.
Source: “Mortgage Applications Down 1.2% as Rates Continue to Rise,” CNBC (Nov. 9, 2016)