Mortgage activity – for both home purchases and refinances – plunged 11.2 percent last week compared to the previous week, the Mortgage Bankers Association reported Wednesday. Despite the latest sizable drop, application volume remains up 42 percent compared to the same week a year ago.
Rising interest rates means fewer and fewer home owners stand to benefit from refinancing. Applications to refinance dropped 15 percent last week, but remain nearly 72 percent higher than a year ago.
“Despite the 30-year-fixed mortgage rate being almost 50 basis points lower than a year ago, refinance activity has been extremely sensitive to rate increases as the pool of borrowers who can benefit from refinancing continues to diminish,” says Mike Fratantoni, MBA’s chief economist.
Meanwhile, applications for home purchases were down 3 percent for the week, now at the lowest level since February. But some economists say this may have more to do with increasing home prices than rates.
The average on a 30-year fixed-rate mortgage rose to 3.69 percent last week, up slightly from 3.65 percent, MBA reports. Nevertheless, about half of mortgage agencies report actual rates higher than 4 percent, Inside Mortgage Finance reports.