Mortgage rates just saw their biggest jump since the presidential election, and that took a heavy toll on demand for home loans.
Total mortgage application volume fell 7.4 percent last week from the previous week, according to the Mortgage Bankers Association's seasonally adjusted report. Volume was 36 percent lower than a year ago.
"Rates continued to increase last week given increasing evidence that the Fed and other central banks are more likely to raise rates given the pickup in economic growth in their respective economies," said Michael Fratantoni, chief economist for the MBA. "Additionally, minutes from the June FOMC meeting showed clear plans to start reducing the size and scope of the Fed's balance sheet and to continue raising the fed funds rate, a signal of confidence in the U.S. economy and job market."
Based on that, the U.S. 10-year Treasury yield has increased 18 basis points over the past month, and mortgage rates are back to their highest level since May. Last week, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $424,100 or less increased to 4.22 percent from 4.20 percent, with points increasing to 0.40 from 0.31, including the origination fee, for 80 percent loan-to-value-ratio loans.