Mortgage applications fell almost 9% last week, on an unadjusted basis, compared to the week prior as interest rates jumped to their highest level in a year, the Mortgage Bankers Association (MBA) reported on Wednesday.
On a seasonally adjusted basis, the total number of applications decreased 8.8%, according to the MBA's Weekly Mortgage Applications Survey for the week ended May 24. The survey covers over 75% of U.S. retail residential mortgage applications.
The total number of refinance applications dropped 12% from the previous week – the biggest drop so far this year – reaching their lowest level since December.
The seasonally adjusted Purchase Index increased 3% from one week earlier, while the unadjusted Purchase Index increased 2% and was 14% higher than the same week one year ago, the trade group said.
Mike Fratantoni, vice president of research and economics for the MBA, said the recent jump in rates – combined with stronger economic data, including an increase in sales of durable goods – means ‘the Fed may soon begin to taper their asset purchases.’
Rates spiked to a 12-month high last week after meeting minutes revealed the Federal Reserve was considering scaling back economic stimulus earlier than expected.
The Fed is currently buying $85 billion a month in bonds and mortgage-backed securities in order to keep borrowing rates low.
About 71% of loan applications filed last week were for refinancing, a decrease from 74% the week prior, the MBA said.
The adjustable-rate mortgage (ARM) share of activity increased to 5%. The average rate on 30-year fixed-rate mortgages with conforming loan balances increased to 3.9%, the highest rate since May 2012, from 3.78% the week prior.
Rates on similar mortgages with jumbo-loan balances rose to 4.07%, the highest level since August, from 3.93% the previous week.
The average rate on 30-year fixed-rate mortgages backed by the Federal Housing Administration also hit its highest level since August, rising to 3.62% from 3.53% the week before.
The average rate for 15-year fixed-rate mortgages increased to 3.1% compared to the prior week's 2.96%. The 5/1 ARM average rate was unchanged at 2.6%, according to the MBA's survey.