A sharp rise in interest rates at the end of last week sent mortgage applications on a slide. Total volume fell 4.6 percent for the week ending May 1 from the previous week, according to the Mortgage Bankers Association (MBA). The numbers are seasonally adjusted. This as European and U.S. bond markets sold off, pushing interest rates to highs not seen in several months.
Refinances, which are highly interest rate sensitive, were the driver of the overall volume drop. Applications to refinance loans fell 8 percent week-to-week. The refinance share decreased to just 53 percent of total applications. It had been as high as 80 percent during the worst of the housing crash, when rates were hitting new record lows and home sales were anemic.
Despite higher rates, applications to purchase homes did manage a slight gain, up 1 percent from the previous week to the highest level since June 2013. That, coincidentally, was exactly when rates spiked sharply, following the Federal Reserve's first hint that it would "taper" its investments in mortgage backed bonds. A precipitous drop in home sales followed that rate increase. Housing demand right now, however, appears to be quite strong.