Refinancing applications fall as mortgage rates rise

Mortgage applications fell in the week ending 13. August declined 3.9% from the previous week and fewer borrowers opted to refinance, according to the latest Mortgage Bankers Association report.

Yields on ten-year government bonds rose overall at the end of last week, however, slightly weakened, and the 30-year mortgage rates covered by the MBA reached 3.06. This deterred some borrowers from refinancing and contributed to a general slowdown in mortgage applications.

"Mortgage rates were at their highest level in about a month, with the 30-year fixed rate rising above 3 percent to 3.06 percent. Mortgage rates last week followed an overall rise in U.S. government bond yields that began with the strong July jobs report before slowing on weaker consumer sentiment and concerns about rising COVID-19 cases, "said Joel Kan, associate vice president of business and industry at MBA Forecast.

"The rise in mortgage rates led to a 5% decline in refinancing, driven by a 7% decline in conventional refinance applications. Although interest rates are 7 basis points lower than the same week a year ago, the refinancing index is about 8% lower," said Kan. "The eligible pool of homeowners that could benefit from refinancing is now smaller."

The refinance share of mortgage activity fell to 67.3% of total applications from 68.0% the previous week.

The share of applications for conventional purchase loans fell from the previous week, while Federal Housing Administration and Veterans Affairs loans, normally popular with first-time buyers, gained a larger share.

FHA applications rose to 9.4% from 8.9% the previous week, while VA's share of total applications rose to 10.3% from 9.6% the previous week. The percentage of applications for United States Department of Agriculture loans declined to 0.4% from 0.5% the previous week. The share of variable-rate mortgage loans remained unchanged at 3.2% of total applications during the week.

And although average loan volumes continued to decline, they still remain at historic highs. The average loan amount for purchases was 339.200 USD, while the average amount for refinancing 393.700 USD was.

"Despite a weekly second-line decline, average loan sizes remain near record highs," said Kan. "This is a continuing sign that sales prices are still elevated, driven by fierce competition that is leading to accelerated home price growth."

Here is a more detailed breakdown of this week's mortgage application data:

  • The average contract interest rate for 30-year fixed-rate mortgages with corresponding loan balances ($548.250 or less) increased from 2.9% to 3.06.
  • The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (above 548.$250) rose from 3.15% to 3.19.
  • The average contract interest rate for 30-year fixed mortgages backed by FHA increased from 3.06% to 3.15%.
  • The average contractual interest rate for 15-year fixed-rate mortgages increased from 2.35% to 2.41%.
  • The average contractual interest rate for 5/1 ARMs increased from 2.52% to 2.90%.

The post Refinance applications fall out as mortgage rates rise appeared first on HousingWire.

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