U.S. mortgage applications slumped last week, reflecting lower demand for home loan refinancing as interest rates advanced to their highest since October.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended March 7 fell 1.9 percent to 671.7.
The Mortgage Bankers Association (MBA) is the national association representing all facets of the real estate finance industry. Headquartered in Washington, DC, MBA represents over 3,000 member companies nationwide in an industry that employs approximately 500,000 people. MBA’s membership base includes all sectors of the real estate finance industry including originators, servicers, underwriters, compliance personnel and information technology professionals representing mortgage companies in the residential, commercial and multi-family arenas.
The U.S. housing market is going through the toughest period in history. Last week's drop in demand may indicate what people can expect this spring, which is the peak home-buying season.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.37 percent, up 0.39 percentage point from the previous week, the highest since the week ended October 12, 2007 when it hit 6.40 percent.
Fixed 15-year mortgage rates averaged 5.72 percent, up from 5.26 percent the previous week. Rates on one-year adjustable-rate mortgages (ARMs) increased to 6.72 percent from 5.83 percent.
Overall mortgage applications last week were 2.7 percent below their year-ago level. The four-week moving average of mortgage applications, which smoothes the volatile weekly figures, was down 12.1 percent to 711.1.
The MBA's seasonally adjusted purchase index rose 1.6 percent to 368.8. The index came in below its year-earlier level of 414.3, a drop of 11.0 percent.
The group's seasonally adjusted index of refinancing applications decreased 4.7 percent to 2,448.2. The index was up 5.9 percent from its year-ago level of 2,312.2.
Consumers seeking to refinance their existing home loans tend to be highly sensitive to shifts in interest rates.
The refinance share of applications fell to 50.6 percent from 52.4 percent the previous week. The ARM share of activity lowered to 15.5 percent, down from 17.3 percent the previous week.