- Average contract interest rate increased to 2.98% last week from 2.96% week before
- Total mortgage application volume slide -5.1% last week from previous week, according to Mortgage Bankers Association
Direct Connection of Mortgage Interest Rates and Mortgage Applications
With the average mortgage interest rates for 30-year fixed-rate mortgages with a 20% down payment rising to 2.98% last week from 2.96% the week before, the Mortgage Bankers Association announced that total mortgage application volume fell -5.1% last week.
Rising Interest Rates Dampen Mortgage Market Activity
Within this -5.1% drop in overall mortgage application volume, mortgage purchase applications fell -6% for the week. Despite this decrease, mortgage purchase applications continued to be +15% higher than one year ago. Some believe that this drop in purchase volume last week was due more to record low inventory of available homes for sale than to rising interest rates.
Applications to refinance a home loan fell -5% during the same week but again, as with purchase applications, refinance applications were +51% higher than one year ago. Just a few weeks ago, before interest rates increased, this y/y comparison of refinance applications was twice as large.
Average Purchase Loan Size Reflects Rising Home Prices and Fewer FHA Applications
Also according to the Mortgage Bankers Association, the average purchase loan size hit a record high of $412,200. This increase in average purchase loan size mirrors home prices that are rising at the fastest pace in over six years.
Another factor reflecting this increasing average purchase loan size was the large drop in FHA loan applications. FHA mortgages, with the plum of a low down payment option, are a favorite of first-time buyers at the entry level of the market but…the low end of the market is experiencing the most acute inventory shortages among all market tiers.
According to Matthew Braham, CEO with Mortgage Daily News,“At a certain point market momentum becomes its own justification and bond prices (highly determinant of interest rates) snowball to lower and lower levels. When bond prices fall, rates rise.”
Thanks to Mortgage Bankers Association, Mortgage daily News and CNBC.