After weeks of volatile interest rates, markets settled slightly last week, but that didn't help the mortgage business.
Total mortgage application volume decreased 3.3 percent on a seasonally adjusted basis last week from the previous week, according to the Mortgage Bankers Association.
Refinance volume weakened further, down 5 percent from the previous week, as relatively higher rates deterred borrowers. Refinance volume was 4.5 percent lower than the same week one year ago, when rates were lower.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 3.93 percent from 3.94 percent, with points decreasing to 0.35 from 0.42 (including the origination fee) for 80 percent loan-to-value ratio loans, according to the MBA.
"There are fewer borrowers remaining who are able to benefit from low rates," said Lynn Fisher, MBA's vice president of research and economics. "The decline in average refinance loan size is also a feature of a declining refinance market. Borrowers with larger loan balances tend to be more rate-sensitive. As refinance applications surge, average loan size tends to go up. As we return to a more normal level of refinance applications, the mix of borrowers returns to normal and average loan size declines."
Mortgage applications to purchase a home, fell 1 percent for the week, despite warmer temperatures and what should be increasing momentum for the spring housing season. However, they were 25 percent higher than the same week a year ago. The lack of homes for sale continues to put upward pressure on home prices.
"Our expectation is that as 2016 continues on, we are going to see those year-over-year [sales] numbers start to come down, and a key reason for that certainly is affordability, whereas rates start to rise," said Stan Humphries, chief economist with Zillow Group. "With home prices starting to escalate, this is fantastic market for sellers."