Interest rates for home loans fell last week for just the third time this year, but homeowners and homebuyers weren't impressed.
Total mortgage application volume fell 0.4 percent for the week, according to the Mortgage Bankers Association's seasonally adjusted report. Volume was 6 percent lower than a year ago.
Homeowners looking to save on their monthly payments saw little incentive to refinance last week. Those applications fell 1 percent for the week and were 18 percent lower than a year ago, when interest rates were considerably lower. Mortgage rates moved sharply higher in April, to the highest level in over four years. Last week they slipped slightly.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) decreased to 4.78 percent from 4.80 percent, with points decreasing to 0.50 from 0.53 (including the origination fee) for 80 percent loan-to-value ratio loans.
"Mortgage rates dipped slightly last week driven mainly by concerns about global growth," said Joel Kan, an MBA economist. "The refinance index continued to slip and was at its lowest since 2008, as was the refinance share of applications."
Mortgage applications to purchase a home should be surging, given the high demand for housing in the heart of the spring market. Instead, they were essentially flat, falling 0.2 percent for the week. They were barely 3 percent higher than one year ago.
Affordability is weighing seriously on the largest and youngest cohort of buyers, millennials. Home prices made their biggest jump in four years in March and likely continued higher in April, as tight supply prompts bidding wars. Cash in this competitive market is king, so it follows that mortgage demand would weaken.
Mortgage rates are turning higher again this week, though some lenders are still at the same level as last week. The yield on the 10-year Treasury, which mortgage rates loosely follow, moved higher Tuesday.
"Most recently 10-year Treasury yields were trying to break below 2.95 percent — a floor that repeatedly proved hard to break," said Matthew Graham, chief operating officer of Mortgage News Daily. "Now, the 10-year yield is up and over 2.97 percent. That's not necessarily a death knell for mortgage rates, but it's definitely not a positive indicator of bigger-picture momentum.