Interest in residential mortgage loans fell 6.8% for the week ending March 25 as rates jump even closer to the 5% mark, according to the Mortgage Bankers Association‘s latest survey.
Few borrowers these days have an incentive to refinance their mortgage. According to the MBA, refi applications fell 15% from the prior week and 60% from a year ago. Meanwhile, the seasonally adjusted purchase index increased 0.64% from one week earlier, showing resilience while rates climb, but was still down 10.1% year over year.
“Mortgage rates jumped to their highest level in more than three years last week, as investors continue to price in the impact of a more restrictive monetary policy from the Federal Reserve,” Mike Fratantoni, MBA’s senior vice president and chief economist, said in a statement.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $647,200) increased to 4.80% from 4.50%. Meanwhile, for jumbo mortgage loans (greater than $647,000), rates jumped to 4.40% from 4.11% in the same period.
“Not surprisingly, refinance application volume declined further, as fewer borrowers have an incentive to apply at rates that are significantly higher than a year ago,” Fratantoni said. In total, the share of refis in new applications went from 44.8% in the prior week to 40.6% in the current survey.
Regarding purchases, Fratantoni said application volumes little changed last week, which is “auspicious” as those who are shopping for homes are struggling with higher and volatile mortgages rates, as well as an ongoing shortage of homes on the market.
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“Given these hurdles, it appears to be promising news that purchase application volume has not declined, as many potential buyers are likely feeling the squeeze in their purchasing power from the jump in rates,” the economist said.
The MBA found that the adjustable-rate mortgage share of the activity increased from 6.4% to 6.6% of total applications. The FHA share of total applications went from 8.8% to 9.3%, and the share of VA applications decreased from 9.8% to 9.5%. The USDA share increased to 0.5%, from 0.4% the week prior.
The survey, conducted since 1990, covers over 75% of the retail residential mortgage applications.
