Higher Mortgage Loan Rates Continue to Reduce Demand for Refinancing

The Mortgage Bankers Association (MBA) released its weekly report on mortgage applications Wednesday morning, noting an increase of 0.6% in the group’s seasonally adjusted composite index for the week ending October 25. Mortgage interest rates rose on all five loan types the MBA tracks.

On an unadjusted basis, the MBA’s composite index increased by 0.3% in the past week. The seasonally adjusted purchase index rose by 2% compared with the week ended October 18. The unadjusted purchase index also increased by 2% for the week and was 10% higher year over year.

Mortgage loan rates for a top-tier 30-year fixed-rate loan ticked up from 3.80% to 3.81% last week, according to Mortgage News Daily. As of Tuesday night, top-tier borrowers were paying 3.85% for that loan. The yield on a 10-year U.S. Treasury note increased from 1.77% to 1.83% week over week as of last night’s close. A year ago, the 10-year note yielded 3.08%.

Joel Kan, the MBA’s associate vice president of economic and industry forecasting, said:

The 10-year Treasury rate rose slightly last week, as markets expected more progress toward a trade deal between the U.S. and China. Mortgage rates increased for the second straight week as a result, with the 30-year fixed rate climbing to 4.05 percent – the highest level since the end of July. … Considering how much lower rates are compared to the end of 2018, purchase applications should continue showing solid year-over-year gains.

The MBA’s refinance index decreased by 1% week over week, and the percentage of all new applications that were seeking refinancing fell from 58.5% to 58%.

Adjustable-rate mortgage loans accounted for 5.2% of all applications, up by 0.4 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 4.02% to 4.05%. The rate for a jumbo 30-year fixed-rate mortgage rose from 3.96% to 4.01%. The average interest rate for a 15-year fixed-rate mortgage ticked up from 3.39% to 3.40%.

The contract interest rate for a 5/1 adjustable-rate mortgage loan rose from 3.29% to 3.43%. Rates on a 30-year FHA-backed fixed-rate loan rose from 3.79% to 3.83%.