It didn't take much to stem the tide of mortgage refinances. A very slight inch higher in interest rates caused a more than slight drop in application volume. Total mortgage applications fell 4.3 percent on a seasonally adjusted basis for the week ending February 19 versus the previous week, according to the Mortgage Bankers Association. The reading included an adjustment to account for the Presidents Day holiday.
Refinance volume, which had been charging higher for weeks, took a breather, falling 8 percent from the previous week, seasonally adjusted. Mortgage applications to purchase a home, which are far less rate-sensitive, increased 2 percent from one week earlier and are now 27 percent higher than the same week one year ago.
After six straight weeks of declines, totaling nearly 40 basis points, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 3.85 percent from 3.83 percent, with points increasing to 0.42 from 0.36 (including the origination fee) for 80 percent loan-to-value ratio loans.
The weekly declines in interest rates had been having an outsized effect on borrowers with larger loans. The bigger the loan, the more a borrower can save on even small rate decreases. It works the other way as well, as even tiny rate moves higher sideline those same borrowers faster.
"The dollar volume of refinance applications decreased by 26 percent, while refinance applications based on loan count decreased 17 percent, indicating that the volume of larger loans dropped to a greater extent than smaller loans," noted Michael Fratantoni, chief economist for the MBA. "The average loan balance declined about 10 percent across all refinance loans."
While volume of mortgage purchase applications is up 27 percent from a year ago, the dollar volume is up 31 percent, a reflection of higher home prices and more activity on the higher end of the housing market. Closed sales of existing homes rose slightly in January, but sales of homes priced below $100,000 fell, according to the National Association of Realtors.