Refinance Applications Plummet as Mortgage Rates Climb
Mortgage refinance applications experienced a significant decline last week, falling 21%, according too data from the Mortgage Bankers Association (MBA). This drop comes after a recent period of increased refinance activity fueled by lower rates. overall mortgage application volume decreased 12.7% compared to the previous week.
The increase in refinance application decline coincided with a rise in mortgage rates. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($806,500 or less) increased to 6.46% from 6.34%,with points rising to 0.61 from 0.57. This represents a 32 basis point increase compared to the same week last year.
Consequently, the refinance share of total mortgage activity decreased from 60% to 55%.The average loan size for refinances also fell, dropping from $461,300 two weeks ago to $380,100, indicating that higher rates are diminishing the incentive for borrowers with larger loans to refinance. Both conventional and VA refinance applications saw substantial declines, falling 22% and 27% respectively.
While refinance activity cooled, purchase applications also saw a slight decrease, down 1% for the week, following three consecutive weeks of gains. Purchase applications remain 16% higher than the same week one year ago.
According to Joel Kan,vice president and deputy chief economist at the MBA,the rate increase was driven by stronger-than-expected economic data pushing Treasury yields higher. He noted that refinance opportunities this year are likely to be “short-lived.”
The housing market continues to experience inventory challenges. August saw the first decline in housing inventory this year, with some sellers choosing to delist properties or postpone sales, awaiting more favorable market conditions.
Looking ahead, the release of the monthly employment report, which was expected to influence mortgage rate movement this week, is now uncertain due to the ongoing government shutdown. Mortgage rates have remained stable at the start of the week.
