"Refinance activity decreased for the second-straight week because fewer borrowers have an incentive to refi at the current level of rates, but there are still some who respond to the small changes we have seen in recent weeks," said Michael Fratantoni, chief economist for the MBA.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances (up to $417,000) increased to 3.87 percent from 3.85 percent, with points increasing to 0.36 from 0.35 (including origination fee) for 80 percent loan-to-value ratio loans. While rates were higher for the first half of last week, they fell midweek, after the Federal Reserve held steady on interest rates.
Mortgage applications to purchase a home were essentially flat for the week but are 13 percent higher than a year ago. Purchase applications are less sensitive to small changes in interest rates.
"No one had anticipated that the Fed would raise rates at last week's meeting. But, MBA and others had expected somewhat more of a signal that they would be increasing rates again in June. Odds of a June [rate hike] have decreased a bit, but we expect that is still the most likely outcome," added Fratantoni.