Higher Mortgage Loan Rates Last Week Quelled Refinancing

The Mortgage Bankers Association (MBA) released its weekly report on mortgage applications Wednesday morning, noting a drop of 11.9% in the group’s seasonally adjusted composite index for the week ending October 18. Mortgage interest rates rose on four of five loan types the MBA tracks.

On an unadjusted basis, the MBA’s composite index decreased by 12% in the past week. The seasonally adjusted purchase index dipped by 4% compared with the week ended October 11. The unadjusted purchase index also slipped by 4% for the week and was 6% higher year over year.

Mortgage loan rates for a top-tier 30-year fixed-rate loan ticked up from 3.79% to 3.80% last week, according to Mortgage News Daily. As of Tuesday night, top-tier borrowers were paying 3.83% for that loan. The week-over-week yield on a 10-year U.S. Treasury note increased from 1.74% to 1.77% as of last night’s close. A year ago, the 10-year note yielded 3.20%.

Mike Fratantoni, MBA Senior Vice President and Chief Economist, said:

Interest rates continue to be volatile, with Brexit votes and ongoing trade negotiations swinging rates higher or lower on any given day. Last week, mortgage rates jumped 10 basis points and were above 4 percent for the first time since September. … Borrowers with larger loans are the most sensitive to rate changes, and with rates climbing higher last week, the average size of a refinance loan application fell to its lowest level this year. … Low mortgage rates continue to fuel buyer interest, but supply and affordability challenges persist.

The MBA’s refinance index decreased by 17% week over week (down 20% on conventional loans) and the percentage of all new applications that were seeking refinancing rose from 62.2% to 58.5%.

Adjustable-rate mortgage loans accounted for 4.8% of all applications, down by 0.7 percentage points compared with the prior week.

According to the MBA, last week’s average mortgage loan rate for a conforming 30-year fixed-rate mortgage increased from 3.92% to 4.02%. The rate for a jumbo 30-year fixed-rate mortgage rose from 3.90% to 3.96%. The average interest rate for a 15-year fixed-rate mortgage increased from 3.32% to 3.39%.

The contract interest rate for a 5/1 adjustable-rate mortgage loan slipped from 3.37% to 3.29%. Rates on a 30-year FHA-backed fixed-rate loan rose from 3.77% to 3.79%.