Mortgage interest rates haven't moved much in the past three weeks, but they are holding at a higher level than they've been for much of the year. That is taking its toll on borrowers who wish to refinance.
Total mortgage application volume decreased 0.2 percent last week on a seasonally adjusted basis from the previous week, according to the Mortgage Bankers Association.
"Volume always drops significantly during Thanksgiving week. However, even after adjusting for the holiday, with rates little changed last week, refinance volume slipped to its lowest level since late July," said Michael Fratantoni, the association's chief economist.
Refinance applications decreased 6 percent from the previous week, seasonally adjusted. Loan applications to purchase a home, which are less influenced by small rate moves, rose 8 percent for the week. Purchase applications are now 30 percent higher than the same week one year ago. It may be that buyers are rushing in now, concerned that interest rates will move decidedly higher at the start of 2016.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.12 percent from 4.14 percent, with points increasing to 0.5 from 0.49 (including the origination fee) for 80 percent loan-to-value ratio loans.
Mortgage rates actually made their biggest move Tuesday, falling back into the 3 percent range, after a weaker-than-expected manufacturing report sent investors fleeing to the bond market. Mortgage rates loosely follow the yield on the U.S. 10-year Treasury.
"Weaker economic data tends to benefit the bond markets that dictate mortgage rate movement, but that alone wasn't enough to explain today's drop," wrote Matthew Graham, chief operating officer of Mortgage News Daily. "Unfortunately, the other pieces to this puzzle are more esoteric. They involve things like the bond market trading dynamics surrounding the beginning of a new month."
All eyes are now on Friday, and the release of the November employment report. Unless it is truly disastrous, most expect the Federal Reserve will raise interest rates at its next meeting in two weeks. December is always the slowest month for home sales, so a slight bump up in rates may not impact the housing market significantly. A bigger headwind is home prices, which are beginning to see wider gains again after a slight cool-down in the first half of this year.