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Mortgage interest rates last week didn't start to climb until the end of the week, but even a few days were enough to dampen demand.
Total mortgage application volume fell 0.2 percent for the week and was 0.8 percent lower than a year ago, according to the Mortgage Bankers Association's seasonally adjusted survey.
The stall was equal for refinance and purchase applications, even though the former are far more rate-sensitive. Applications to refinance a home loan fell 0.3 percent last week and were 16 percent lower than a year ago. The refinance share of applications fell to 37.2 percent of all applications, the lowest level since September 2008.
Borrowers really had no incentive to refinance, as the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) increased to its highest level since September 2013, 4.73 percent, from 4.66 percent, with points increasing to 0.49 from 0.46 (including the origination fee) for 80 percent loan-to-value ratio loans.
"Treasury rates increased significantly last week, partly driven by the market's reaction to more hawkish comments from key Fed officials and positive economic news on strong retail sales and declining jobless claims," said Joel Kan, an MBA economist.
Mortgage applications to purchase a home were unchanged for the week but 11 percent higher than a year ago. Homebuyers are less concerned about interest rates than they are about finding a home to buy. Demand is incredibly high, and even though more listings are coming on the market this spring, they are not enough to satisfy it. This dynamic is pushing home prices to new record highs and sidelining those buyers who are seeing entry-level homes.
"Applications for government purchase applications, loans more likely to be used by first-time buyers, declined for the week," Kan noted.
Government loans, those from the FHA or VA, offer low down payments, which entry-level buyers need. But there are few entry-level homes for sale, so there is less demand for loans to buy them. Sales of homes priced below $100,000 fell 21 percent in March from a year ago, according to the National Association of Realtors. Most of the sales activity is now in the move-up and high-end range.
"Whereas rates had leveled off and even improved somewhat during March and early April, they've quickly shown more volatile colors," wrote Matthew Graham, chief operating officer of Mortgage News Daily.
Mortgage rates continued to move higher this week, with some lenders now a quarter percentage point higher than 2018's best levels. Volatility in the bond market, which mortgage rates follow, is likely to continue this week, with reports expected on first-quarter GDP and a continued flow of quarterly company earnings reports.