Mortgage Refinance Applications Dive on Highest Rates in a Year

Mortgage Refinance Applications Dive on Highest Rates in a YearMortgage refinance applications dropped 12 percent, the biggest decrease in a single week, as mortgage rates climbed to a 12-month high, the Mortgage Bankers Association said Wednesday.
Mortgage applications for both purchases and refinances decreased 8.8 percent last week from one week earlier, according to MBA’s data.
The Refinance Index decreased 12 percent last week from the previous week to the lowest level since December 2012.
Moreover, the refinance share of mortgage activity decreased to 71 percent of total applications, from 74 percent the previous week, to the lowest level since April 2012.
The biggest driver of higher rates continues to be positive economic news, with the added impetus of the prospect that the Federal Reserve will have to soon ease bond purchases, allowing for a possible increase in the federal funds rate. That benchmark rate as been near zero since the fall of 2008.
“Rates rose in response to stronger economic data and an increasing chance that the Fed may soon begin to taper their asset purchases,” said Mike Fratantoni, MBA’s Vice President of Research and Economics.
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 3.90 percent, the highest rate since May 2012, from 3.78 percent, 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 4.07 percent, the highest rate since August 2012, from 3.93 percent, for 80 percent LTV loans.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.62 percent, the highest rate since August 2012, from 3.53 percent, for 80 percent LTV loans.
The average contract interest rate for 15-year fixed-rate mortgages increased to 3.10 percent, the highest rate since August 2012, from 2.96 percent, for 80 percent LTV loans.

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