A sudden turn in mortgage rates made for an equally fast turn in mortgage applications. After falling for seven weeks straight, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 3.67 percent from 3.59 percent, according to a weekly report from the Mortgage Bankers Association.
This is the highest rate in just over a month.
"Underlying interest rates are moving higher, dragging mortgage rates along with them," said Keith Gumbinger, vice president of HSH.com, a data and analytics site. "This has come as the result of somewhat better conditions in the labor market, helping investors feel more confident that the recovery will overcome its recent soft patch."
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The higher rates cause a drop in mortgage applications. Refinance volume fell 8 percent, while mortgage applications to purchase a home fell 4 percent, according to the MBA report.
Rising rates are not welcome news, especially now in the heart of the spring housing market.
Much of the market is being fueled by all-cash investors, but first-time home buyers were just beginning to return. They generally rely on low-rate mortgages.
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The Federal Reserve recently hinted that it may start to reduce the number of mortgage-backed securities it purchases. That would cause rates to rise even more, which has some warning that rather than pull back, consumers might consider locking in low rates sooner than later.
"With inflation low and the economy still stumbling along, there's no reason to worry that these support programs will end anytime soon, but it is prudent to have a plan in place for when the time comes," noted Gumbinger.
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