The bleeding in the mortgage business appears to have slowed, following a sharp rise in mortgage rates postelection.
Total mortgage application volume was essentially flat last week, compared with the previous week on a seasonally adjusted basis. It fell just 0.7 percent, according to the Mortgage Bankers Association, which included an adjustment for the Thanksgiving holiday.
Refinance volume had been falling dramatically but seemed to flatten last week, down just 1 percent. That was enough to hit the lowest level of this year. Refinance applications are now down 7 percent from a year ago.
"Refinances are almost entirely driven by mortgage rates, while purchase activity is a function of a broader set of variables including the state of the job market, demographics, and consumer confidence," said Michael Fratantoni, chief economist for the MBA.
Purchase volume has fared better under the higher interest rate conditions, although it is just barely higher than one year ago. Mortgage applications to purchase a home rose 0.4 percent for the week, seasonally adjusted. Homebuyers are not quite as interest-rate sensitive as those looking to save money on monthly payments by refinancing. While the jump in interest rates was sizable, rates are still low historically.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to its highest level since October 2014, 4.27 percent, from 4.23 percent, with points decreasing to 0.37 from 0.41 (including the origination fee) for 80 percent loan-to-value ratio loans.
"Over the last month, going back to the week prior to the election, mortgage rates on 30-year loans have increased 50 basis points, and refinance application volume has dropped by 28 percent. Over the same time period, purchase application volume is up almost 12 percent," said Fratantoni.
Mortgage rates did not move at all on Tuesday, the first day with nearly no lender reprices since the election. This may be the calm before a potential storm Thursday, when the European Central Bank is scheduled to announce plans to wind down its asset purchases, as the Federal Reserve did in the spring of 2013.
"In the current case, markets have done much more to prepare for European tapering, but the announcement could nonetheless cause volatility for rates," said Matthew Graham, chief operating officer of Mortgage News Daily.