Applications slow as interest rates increase
Demand for mortgages fell 5.7% week over week as the average interest rate for 30-year mortgages surged to a two-month high, according to the Mortgage Bankers Association.
MBA reported today that home loan application volume was down 5.7% on a seasonally adjusted basis for the week ending May 12. Unadjusted, applications declined 6% from one week earlier.
“Mortgage rates increased last week even as Treasury yields were essentially flat, with the spread between the two rates widening to 310 basis points,” MBA deputy chief economist Joel Kan explained. “Mortgage application activity slowed, as most mortgage rates in the survey increased, with the 30-year fixed rate jumping nine basis points to its highest level in two months at 6.57%.”
Read more: Mortgage originations plummet – what can you do about it?
Both refinance and purchase application volumes also edged down from the week prior. MBA’s refinance index declined by 8%, and the purchase index decreased by 4.8%.
“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,” added Kan. “Refinance applications accounted for 27% of all applications and dropped almost 8% last week. Most borrowers have lower rates on their mortgages, and those who are in the market are extremely rate sensitive.”
Of total applications, the refinance share of mortgage activity dipped six basis points to 27.4%, and the adjustable-rate mortgage share of application volume slipped to 6.5%.
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