U.S. Mortgage Demand Slides On Higher 30-year Rates

MortgageRates 052015

Mortgage application volumes in the U.S. have fallen for the fourth week in a row as the 30-year mortgage rates rose to their highest level since December 2014, according to data from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey.

The Market Composite Index, a measure of mortgage loan application volume, decreased 1.5 percent on a seasonally adjusted basis for the week ended May 15 from one week earlier. This includes both refinancing and home purchase applications.

On an unadjusted basis, the index decreased 2 percent compared with the previous week.

The refinance index increased 0.3 percent from the previous week on a seasonally adjusted basis. The refinance share of mortgage activity rose to 52 percent of total applications from 51 percent in the previous week.

"Mortgage rates increased last week, and Treasury rates increased to a recent high at mid week before falling at the end of the week. Overall purchase activity fell for the week, along with conventional refinance volume, but government refinance volume increased," said Michael Fratantoni, chief economist for the MBA.

The U.S. 30-year mortgage rates are derived from the yield on the 30-year U.S. Treasury bond.

The seasonally adjusted purchase index decreased 4 percent from one week earlier, to the lowest level since April. The unadjusted purchase index also declined 4 percent compared with the previous week, but was 11 percent higher than the same period last year.

Frantantoni noted that the level of purchase applications were 11 percent higher than last year, the drop this week may indicate borrowers being wary of the recent run up in mortgage rates.

The year 2014 was the lowest for refinance activity since year 2000.

The survey data showed that the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $417,000 or less increased to 4.04 percent from 4.00 percent last week. This is the highest level since December 2014.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances of greater than $417,000 also increased to 4.04 percent from last week's 3.99 percent.

Meanwhile, the average contract interest rate for 15-year fixed-rate mortgages increased to 3.26 percent from 3.23 percent last week.

According to the MBA, the survey covers over 75 percent of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990.

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