Mortgage demand declined last week as interest rates ticked upward, keeping homebuyers sidelined.
Seasonally adjusted mortgage application volumes fell 5.2% for the week ending Nov. 14, according to the Mortgage Bankers Association (MBA). Applications fell 7% on an unadjusted basis.
Borrowers remain sensitive to even small rate increases, noted Joel Kan, deputy chief economist for the MBA.
“Mortgage rates increased for the third consecutive week, with the 30-year fixed rate inching higher to its highest level in four weeks at 6.37%,” Kan said in a statement accompanying the data release.
The MBA’s refinance index shrank 7% from the week before and was 125% higher than a year ago. The association’s purchase index fell 2% from one week earlier on a seasonally adjusted basis. The unadjusted purchase index was down 7% over the week.
Purchase applications saw a notable uptick two weeks ago as increased mortgage activity reversed consecutive weeks of declines.
Kan said rising mortgage rates have “potential homebuyers moving to the sidelines again.”
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances rose to 6.37% from 6.34% the week before and 6.31% two weeks ago, according to MBA data.
The average interest rate for 30-year fixed-rate mortgages backed by the Federal Housing Administration (FHA) remained unchanged from the previous week at 6.14%.
The FHA share of total applications rose to 19.9% from 19.4% the week prior, and Kan noted in his statement “a small increase in FHA purchase applications.” The share of applications for mortgages backed by the U.S. Department of Veterans Affairs increased to 15.2% from 14.8% the previous week.
Refinance share shrank to 55.4% of total mortgage activity from 55.6% the week before as higher rates suppressed demand.
The adjustable-rate mortgage (ARM) share of activity continued several weeks of declines, falling to 7.5% last week from 7.8% the week before and 8.7% two weeks ago. The ARM share of applications had risen to almost 11% in the middle of October.
The average contract interest rate for 5/1 ARMs — whereby a borrower pays a fixed mortgage rate for the first five years of the loan term, after which it adjusts on an annual basis — ticked up 15 basis points to 5.65% from 5.5% the week prior.
