Mortgage Applications Drop as Rates Edge Higher

For the second consecutive week, mortgage applications fell as higher interest rates continued to put the squeeze on refinancing activity, the Mortgage Bankers Association reported Wednesday. 

The MBA’s index on mortgage application activity, which includes both refinancing and home purchases, dropped 4.6 percent for the week ending Aug. 16. 

The refinance index was attributed to that drop, falling 7.7 percent last week from the previous week -- its largest weekly drop since late June. The refinance index has fallen 62.1 percent since reaching its peak during the week ending May 3. 

Applications dropped as mortgage rates rose 12 basis points to 4.68 percent last week. That matches the year’s high for 30-year mortgage rates, which was first hit in July, according to the MBA. Mortgage rates continue to rise as concerns mount over the Fed tapering its bond-buying program, which had been keeping mortgage rates near its historical lows in recent months. 

However, mortgage rates still remain low by historical standards and are still attracting home buyers. The MBA’s index showed that loan demand for home purchases, viewed as a gauge for future home sales, rose 1.2 percent last week. That climb comes after a 5.4 percent drop the previous week, the MBA reports. 

Source: “U.S. Mortgage Applications Fall as Rates Push Higher,” Reuters (Aug. 21, 2013