Weekly mortgage demand falls 11% as interest rates rise

Mortgage rates rose again last week, increasing demand in both the refinance and purchase markets. According to the Mortgage Bankers Association's seasonally adjusted index, total mortgage application volume fell 10.8% compared to the previous week.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances – $766,550 or less – increased from 6.73% to 6.81%, with points on loans at 20% down falling from 0.69 to 0.68, including the processing fee payment.

“Applications fell for the sixth straight week, with purchasing activity falling to its lowest level since mid-August and refinancing activity falling to its lowest level since May,” Joel Kan, an MBA economist, wrote in a press release.

Home loan refinance applications, the most sensitive to weekly interest rate changes, fell 19% for the week but were 48% higher than the same week a year ago. At this time last year, the 30-year fixed rate was 80 basis points higher.

“The average loan size on a refinance application fell below $300,000 as borrowers with larger loans tend to be more sensitive to changes in mortgage rates,” Kan added.

Mortgage applications to purchase a home fell 5% this week and were just 2% higher than the same week a year ago. Home buying activity has increased in recent months as more supply comes onto the market and home prices ease slightly. However, mortgage rates are deterring some buyers again, and concerns about the economy and the election may be deterring some right now.

Mortgage rates were essentially flat earlier this week, and whatever the results or non-results of the election will certainly add to the recent volatility. Additionally, the Federal Reserve will announce its latest interest rate decision on Thursday.