Mortgage interest rates remain just below 4 percent, which is still historically low territory, but they have climbed to the highest level of the year, causing mortgage applications to drop significantly last week, mortgage bankers reported Wednesday.
The overall Market Composite Index from the Mortgage Bankers Association that gauges both purchase and refinancing applications plunged by 13.2 percent on a seasonally adjusted basis from one week earlier.
The index component measuring just refinancing applications fell even more, by 16 percent from the previous week. The refinance share of mortgage activity decreased to 66 percent of total applications from 69 percent the previous week.
“Mortgage rates increased to their highest level since the beginning of the year last week, and application volume dropped sharply as a result, particularly for refinances,” said MBA Chief Economist Mike Fratantoni. “Refinance volume fell particularly for larger loans, as evidenced by the decline of almost $25,000 in the average loan size for a refinance loan.”
The Federal Housing Administration share of total applications increased to 15.2 percent this week, from 14.1 percent last week, as more homebuyers took advantage of new low-downpayment programs and a cut in mortgage insurance premiums.
The average contract interest rate for 30-year fixed-rate mortgages, with conforming loan balances ($417,000 or less), increased to 3.93 percent from 3.84 percent, for 80 percent loan-to-value ratio loans, the MBA reported.
The average contract interest rate for 30-year fixed-rate mortgages, with jumbo loan balances (greater than $417,000), increased to 3.92 percent from 3.90 percent, for 80 percent LTV loans.
The average contract interest rate for 30-year fixed-rate mortgages backed by FHA increased to 3.73 percent from 3.72 percent, for 80 percent LTV loans.