The drop was expected, given how quickly mortgage interest rates rose. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 3.95 percent, from 3.77 percent, with points increasing to 0.39 from 0.38 (including the origination fee) for 80 percent loan-to-value ratio loans.
"Following the election, mortgage rates saw their biggest week-over-week increase since the taper tantrum in June 2013, and reached their highest level since January of this year," said David Stevens, president and CEO of the Mortgage Bankers Association. "Investor expectations of faster growth and higher inflation are driving the jump up in rates, and rates have now increased for five of the past six weeks, spurring a commensurate drop in refinance activity."
Rate-sensitive refinances fell another 11 percent last week from the previous week, seasonally adjusted, to the lowest level since March. Refinance volume is still 19 percent higher than the same week one year ago, when rates were slightly higher.
"It is no surprise that refinance volume has fallen, as the long boom has meant that there are fewer borrowers with any incentive to refi," said Stevens. "We continue to expect strong growth in home sales and purchase volume over the next few years, given our expectations of a strong job market and favorable demographics. The decline this week likely just reflects potential buyers waiting to see whether rates will stay at these higher levels."