By Mike Colpitts
Mortgage activity dropped for the second week in a row as mortgage rates rose driven by a strong hike in U.S. Treasury yields. Bond rates have been rising for one straight week, pushing mortgage rates higher.
The Mortgage Bankers Association market composite index on loan applications fell 4.5% on a seasonally adjusted basis from one week earlier. A slowdown in refinances of 5% pushed by a hike in mortgage rates led the drop-off.
The fixed 30-year mortgage with conforming loan balances of $417,500 or less averaged 3.76% for the second week in a row. Purchase applications fell by 2%. The slowdown was coupled with a slowdown of homeowners shopping for refinancing, who selected to not lock-in loan rates. Rates hit their all-time record low levels in July when the 30-year fixed reached an average of 3.49%.
“While refinance volume fell, the Home Affordable Refinance Program share of refinances increased from 22% to 24%, meaning the drop in rate-term refinance transactions fell somewhat more than the overall 5% decline for conventional refinance applications,” said MBA chief economist Jay Brinkmann.
However, rates on government sponsored FHA loans averaged much lower as consumers sought out the lowest rates possible. Mortgage rates on 30-year fixed-rate loans backed by the FHA fell to 3.53%, a slim single basis point drop from the prior week. The average contract interest rate for 15-year fixed-rate mortgages rose to 3.12% from 3.08%.
The rate on 5/1 adjustable-rate mortgages completed by borrowers also jumped a single basis point to 2.73%. Some 96% of all U.S. mortgage borrowers are opting for fixed rate loans.