The volume of weekly mortgage applications snapped a five-week streak of increases last week, falling 0.7% amid higher in interest rates and slower refinance activity.
The Mortgage Bankers Association (MBA) reports that applications for all home mortgages fell 0.7% week over week on a seasonally adjusted basis for the week ending Dec. 13. On an unadjusted basis, the index was down 2% compared to the week before.
Refinancing remains robust but was down 3% from the previous week. The refinance share of mortgage activity fell just a tick to 46.7%, down from the previous week’s level of 46.8%, as loan refinancing from the U.S. Veterans Affairs (VA) fell 17%. Refinancing for the week was still 41% higher than the same week a year ago. The MBA’s purchase index fell 2% from the previous week but was 6% higher than the same week last year.
The Federal Housing Administration (FHA) made up 17.6% of applications, up from 16.5% the week before. The share of VA loans decreased 1% for the week to 15.3%. The U.S. Department of Agriculture’s share of total applications increased to 0.5% from 0.4%.
An increase in interest rates appears to be a main factor for the plateauing of applications levels. The MBA reports that the average contract interest rate for 30-year fixed-rate mortgages, with conforming loan balances of $766,550 or less, increased to 6.75% from the previous week’s 6.67%.
Las week’s slight decrease comes after five weeks of growth for mortgage applications, spurred by falling interest rates and a boomlet in refinancing. For the week of Dec. 6, interest rates fell to their lowest level in six weeks, according to Freddie Mac.
“Mortgage rates increased last week, leading to overall mortgage application activity decreasing for the first time in five weeks,” said Joel Kan, MBA’s vice president and deputy chief economist. “Conventional and VA purchase applications drove this week’s increase in purchase activity on a weekly and annual basis. Buyers remained active in the purchase market, helped by gradually improving inventory conditions and a more positive outlook on the economy and job market. Refinance applications declined last week, largely driven by VA refinances that were down 17% after two weeks of gains.”
