A sudden increase in mortgage interest rates triggered a slowdown in loan applications for the first time in more than two months, according to the Mortgage Bankers Association weekly survey. The index saw a fall in applications, bringing refinances to a stall.
Mortgage rates rose sharply for the week on a 30-year fixed rate loan to an average of 4.69% from 4.46% a week ago with 0.90 points on closed mortgages offered to consumers. The sudden jolt in rates may be attributed to an increase in Treasury bonds, which moved above 3% on the benchmark 10-year note for the first time in weeks. The increase could have a growing impact on home purchases.
Mortgage growth fell as the refinance index tumbled 9.2% on the week for the third week in a row, reaching its lowest level since last May. The purchase index climbed 4.8% from the previous week. The average interest rate offered to borrowers on a fixed 15-year mortgage also rose substantially to 3.79% from 3.64% the week earlier.
“Stronger economic data towards the end of the week coupled with the end of the Fed’s second round of quantitative easing helped bring mortgage rates to their highest level in over a month,” said Michael Fratantoni, MBA’s vice president of research and economics.
The bankers’ four week moving average on all mortgage applications is down a slim 0.5%. Refinances still, however, hold their grip on market volume, composing 66.4% of applications, a decline from 69.5% a week earlier as many independent mortgage companies struggle to stay in business.
“Mortgage origination volume in the first quarter of 2011 dropped significantly from the refinance-heavy fourth quarter of 2010,” according to Marina Walsh, MBA’s associated vice president of Industry Analysis. “As in the past, mortgage companies had difficulty managing staff levels to reflect the drop in loan volume. This caused higher per-loan production costs. Even though overall revenues went up, they did not go up fast enough to offset the higher costs.”
Adjustable rates made up a slightly larger portion of closed mortgages, increasing to a slim 6.1% of applications.