A brief roller coaster ride for mortgage rates caused yet another swing in demand. After dropping to a three-year low two weeks ago, rates then shot right back up again.
As a result, total mortgage application volume dropped 12.7% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. The drop was mostly driven by a pullback in refinancing.
Applications to refinance a home loan fell 21% for the week and were 16% higher than the same week one year ago. This, even though mortgage rates were 32 basis points higher last week than the year before. The refinance share of mortgage activity decreased to 55% of total applications from 60% the previous week.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $806,500 or less, increased to 6.46% from 6.34%, with points increasing to 0.61 from 0.57, including the origination fee, for loans with a 20% down payment.
“Mortgage rates increased to its highest level in three weeks as Treasury yields pushed higher on recent, stronger than expected economic data. After the burst in refinancing activity over the past month, this reversal in mortgage rates led to a sizeable drop in refinance applications, consistent with our view that refinance opportunities this year will be short-lived,” said Joel Kan, MBA’s vice president and deputy chief economist.
