Mortgage applications decreased by 2.6%, falling for the seventh straight week as key interest rates jumped to seven-year highs, according to the Mortgage Bankers Association.

The MBA's Weekly Mortgage Applications Survey for the week ending May 18 found that the refinance index reached its lowest level in 18 years, decreasing 4% from the previous week. The refinance share of application activity decreased to 35.7% from 35.9% the previous week.

"Treasury rates increased 10 basis points last week, driven largely by favorable news on retail sales data and industrial production in April, which more than offset data showing still-slow new residential construction," Joel Kan, the MBA's associate vice president of economic and industry forecasting, said in a press release. "As a result of rising rates, refinance applications continued to decrease, with the refinance index hitting its lowest level since December 2000."

Mortgage applications continue slide

The seasonally adjusted purchase index decreased 2% from one week earlier and the unadjusted purchase index decreased 3% compared with the previous week and was 3% higher than the same week one year ago.

Adjustable-rate loan activity increased to 6.8% from 6.5% of total applications while the share of Federal Housing Administration-guaranteed loans remained unchanged at 10.3% from the week prior.

The share of applications for Veterans Affairs-guaranteed loans decreased to 9.8% from 10.3%% and the U.S. Department of Agriculture/Rural Development share remained unchanged at 0.8% from the week prior.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) increased 9 basis points to 4.86%. For 30-year fixed-rate mortgages with jumbo loan balances (greater than $453,100), the average contract rate 8 basis points increased to 4.81%.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased 12 basis points to 4.9%. For 15-year fixed-rate mortgages the average rate increased 11 basis points 4.31%.

The average contract interest rate for 5/1 ARMs increased to its highest level in the history of the survey, 4.12%, from 4.09%.

Glenn McCullom

Glenn McCullom

Glenn McCullom is the copy editor of National Mortgage News.