Weekly mortgage applications plummet by 12% as interest rates rise

• Mortgage applications for home purchases, which had been less affected by weekly rate changes, dropped by 4% this week but was 6% higher compared to its corresponding week last year.
• Refinances were well-fortified in several months, but higher rates are proving to be burdensome.

Mortgage rates have been smooth sailing in the past few months, and last week’s hike has led to a dip mortgage activity.

Mortgage applications slumped 11.9% from last week according to the seasonally adjusted index published by the Mortgage Bankers Association. Volume stands at 54% higher than the previous year.
The mean total interest rate for a 30-year, fixed-rate mortgage with conforming loan balances ($484,350 or less) rose to 4.02% from the previous 3.92%. Points also moved up to 0.38 from 0.35 (as well as the origination fee) for home loans with a 20% down payment.

The sliding rates resulted in a 17% fall in applications to refinance a mortgage.

Refinance volume has been stable for several consecutive months, considering the general low-rate setting. However, higher rates are creeping in. Refinance activity was well-placed at 126% higher as of the exact week 12 months ago, but yearly profits are dwindling.

Mortgage applications for home purchases, which had been less affected by weekly rate changes, dropped by 4% this week but was 6% higher compared to its corresponding week last year.

Going by how low mortgage rates are now than they were last year, mortgage activity ought to be experiencing a boom. Rather, buyers are currently dealing with higher mortgage prices that are counterbalancing the savings from lower rates. This scenario is the result of a progressive scarcity of homes for sale despite soaring demand.

In September, mortgage prices registered its greatest uptick in almost two years, according to statistics from the National Association of Realtors. Accordingly, sales nosedived more than envisaged.