An abrupt turn higher for mortgage interest rates caused weekly demand from both potential homebuyers and current homeowners to drop. Total mortgage application volume fell 5.1% last week compared to the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $766,550 or less, increased to 6.36% from 6.14%, with points increasing to 0.62 from 0.61, including the origination fee, for loans with a 20% down payment. That was the highest rate since August.
“In the wake of stronger economic data last week, including the September jobs report, mortgage rates moved higher,” said Mike Fratantoni, chief economist at the Mortgage Bankers Association.
Applications to refinance a home loan, which had been surging for several months, fell 9% for the week but were still 159% higher than the same week one year ago. Last year at this time, mortgage rates were 131 basis points higher.
“Conventional loan refinances, which tend to have larger balances than government loans and hence are more responsive for a given change in mortgage rates, fell to a greater extent over the week,” Fratantoni said.
Applications for a mortgage to purchase a home were essentially flat for the week, dropping 0.1% from the previous week. Purchase demand was 8% higher than the same week one year ago. While mortgage rates are lower than they were a year ago, home prices are higher. Inventory has improved, but there is still not enough for sale on the more affordable end of the market.
Mortgage rates moved sharply higher last Friday, following the release of the stronger-than-expected monthly employment report, according to a separate survey from Mortgage News Daily. It showed rates continuing higher Monday and now puts the average on the 30-year fixed-rate mortgage at 6.62%. Rates were flat on Tuesday.
“While the worst may be over in terms of the rapid, upward movement, it will take new data to put compelling downward pressure on rates,” said Matthew Graham, chief operating officer at Mortgage News Daily.