Applications to refinance, which had a brief surge on a temporary rate drop, fell 9 percent from the previous week, seasonally adjusted. Applications to purchase a home, which are far less rate-sensitive, fell 4 percent week-to-week. Purchase volume has fallen 17 percent in the past four weeks, signaling a potential slowdown in home sales ahead.
Mortgage rates have moved in a very narrow range, hovering just above or below 4 percent for most of this year. Last week, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.09 percent from 4.10 percent, with points increasing to 0.42 from 0.39 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans, according to the MBA. They may continue in this range for the rest of the year.
"Given recent economic growth and job market health, we had been expecting a September rate hike, however, given recent financial market volatility and global growth concerns, along with still-low US inflation, we are expecting the first rate hike to be moved to December 2015," said Mike Fratantoni, chief economist for the MBA.
It is still possible the Fed could make a move this week, and analysts are split as to what a potential rate hike could mean for the housing market. Mortgage rates do not follow directly rate moves set by the Federal Reserve, but instead follow bond yields, which can be affected by Fed moves.
"While lenders may temporarily raise rates, they'll probably lower them again in a repeat performance of what we saw when the Fed announced it was ending the QE [Quantitative Easing] program: Rates jumped up by almost a point; applications cratered; home sales slowed down; rates returned to lower levels; home sales and loan applications picked back up," said Rick Sharga, executive vice-president at Auction.com. "Most likely we'll see slow, incremental rate increases over time as lenders test the waters."