Interest rates spiked following the Federal Reserve's announcement last Wednesday that it would start tapering its stimulus program at the end of this year.
As a result of that rate spike, mortgage applications fell 3% last week, as indicated by the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey for the week ending June 21.
The market composite index, a measure of mortgage loan application volume, decreased 3% on a seasonally adjusted basis from one week earlier to the lowest level since November 2011. The refinancing index also fell 3% to its lowest level since November 2011.
Despite the dip in applications, the housing market is on the mend, the MBA says. The purchasing index increased by 2% and is up 16% from the same week in 2012, according to the report.
‘Mortgage rates increased by the most in a single week since 2011, and refinance application volume dropped to its lowest level in almost two years,’ said Mike Fratantoni, the MBA's vice president of research and economics. ‘However, applications for conventional purchase loans picked up by more than three percent over the week, and total purchase applications were 16 percent higher than one year ago, indicating that home buyers are not yet dissuaded by the increase in mortgage rates.’
Fratantoni noted that there had been a decrease in government purchase applications, which was ‘likely a function of the recent increase in FHA mortgage insurance premiums.’
Adjustable-rate mortgage activity accounted for 7% of total applications, while the government share of purchase applications dropped to 28%.
