30-Year Rate Jumps to 6-Month High; Mortgage Applications Drop

30-Year Rate Jumps to 6-Month High, Mortgage Applications DropPositive news on the economy had a negative impact on long-term interest rates last week, with bankers reporting that the 30-year-fixed rate jumped to a 6-month-plus high and mortgage applications dropped.
Responding primarily to a better-than-anticipated employment report on March 1, mortgage applications for both purchases and refinances dropped as rates went up, according to an update today from the Mortgage Bankers Association.
The 30-year fixed rate jumped to 3.81 percent last week on most conforming loan balances, from 3.7 percent the previous week.
Another impact of the jobs report: the refinance share of applications dropped to the lowest level since May 2012.
Job creation surged beyond Wall Street expectations in February, with the economy creating a net 236,000 new jobs as the jobless rate fell to 7.7 percent from 7.9 percent.
The bankers’ overall market index measuring loan applications for both purchases and refinances decreased 4.7 percent on a seasonally adjusted basis last week, from one week earlier.
The refinance index decreased 5 percent from the previous week, while the purchase-only index decreased 1 percent compared with the previous week, and was 9 percent higher than the same week one year ago.
The average contract interest rate for 30-year fixed-rate mortgages, with conforming loan balances ($417,500 or less), increased to 3.81 percent, the highest rate since August 2012, from 3.70 percent, for 80 percent loan-to-value ratio (LTV) loans.
The refinance share of mortgage activity decreased to 76 percent of total applications, the lowest level since May 2012, from 77 percent the previous week.
But mortgage bankers say there is still strong demand for refinancing by “underwater borrowers” under the Obama Administration’s expanded Home Affordable Refinance Program, or HARP.
The HARP share of refinance applications increased to 30 percent from 28 percent the prior week.
“The announcement of stronger than anticipated job growth last week led to an increase in interest rates, with the 30 year fixed mortgage rate in our survey reaching the highest level in more than six months,” said Mike Fratantoni, MBA’s Vice President of Research and Economics.  “Refinance applications declined as a result, but remain high given the steady flow of HARP applications.”
The adjustable-rate mortgage (ARM) share of activity increased to 5 percent of total applications.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 3.81 percent, the highest rate since August 2012, from 3.70 percent, with points remaining unchanged at  0.39 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) increased to 3.90 percent from 3.80 percent, with points increasing to 0.46 from 0.37 (including the origination fee) for 80 percent LTV loans.
The average contract interest rate for 30-year fixed-rate mortgages backed by the Federal Housing Administration (FHA) increased to 3.53 percent from 3.47 percent, with points increasing to 0.38 from 0.33 (including the origination fee) for 80 percent LTV loans.

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