Mortgage activity falls as rates tick up again

Consecutive weeks of mortgage rate increases suppressed refinance activity, causing a notable fall in mortgage applications, the Mortgage Bankers Association found.

The MBA's Market Composite Index, a measure of mortgage loan application volume,  decreased 5.2% on a seasonally-adjusted basis from one week prior for the week ending Nov. 14. On an unadjusted basis, the Index dropped 7% compared with the previous week.

The Refinance Index primarily drove the fall, declining 7% from the week before, but was still 125% higher than the same week last year.

The seasonally adjusted Purchase Index decreased 2% from a week prior, while it dropped 7% on an unadjusted basis. The unadjusted Purchase Index was still up 26% from the same week a year ago.

"Mortgage rates increased for the third consecutive week, with the 30-year fixed rate inching higher to its highest level in four weeks at 6.37 percent," said Joel Kan, MBA's vice president and deputy chief economist, in a press release Wednesday.

"Application activity over the week was lower, with potential homebuyers moving to the sidelines again, although there was a small increase in FHA purchase applications," he added. "Refinance applications decreased as borrowers remain sensitive to even small increases in rates at this level."

Refinance volume surged late last month as mortgage rates hit their lowest level in more than a year, naturally resulting in slower activity as rates tick back up this month.

The refinance share of total mortgage applications decreased to 55.4% from 55.6% the previous week and 57% two weeks prior. The adjustable-rate mortgage share of total activity slumped to 7.5% from 7.8%.

"The overall average loan size across both purchase and refinance applications dipped to its lowest level since August of this year, driven by another drop in the ARM share," Kan said.

Loans backed by the Federal Housing Administration, the Department of Veterans Affairs and U.S. Department of Agriculture all saw their share of total applications increase last week. FHA loans saw a 0.5 percentage-point rise to 19.9%, VA loans climbed to 15.2% from 14.8% and USDA loans increased 0.1 percentage points to 0.3%.

Three of the five types of mortgages the MBA tracks saw an incline in interest rates last week compared with the week prior, including:

• 30-year fixed-rate mortgages with conforming loan balances, 6.37% from 6.34%;
• 15-year fixed-rate mortgages, 5.83% from 5.70%;
• and five-year ARMS, 5.65% from 5.50%.
  

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances decreased to 6.39% from 6.46%, while 30-year fixed-rate mortgages backed by the FHA held at 6.14%.