Volume was just 3.5 percent higher than a year ago, according to the Mortgage Bankers Association.
Applications to refinance a home loan, which are most rate-sensitive, fell 7 percent for the week and were 2.8 percent higher than one year ago, when interest rates were lower. The refinance share of mortgage activity decreased to its lowest level since July, 44.4 percent of total applications, from 46.5 percent the previous week.
Borrowers today may be more likely to take out a home equity line of credit than to refinance a mortgage and lose the low rate they already have. Home equity line volume has been rising steadily, although it is still not as high as it was during the last housing boom, when borrowers were using their homes like ATMs.
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 January 2014, 4.64 percent, from 4.57 percent, with points increasing to 0.61 from 0.59 (including the origination fee) for 80 percent loan-to-value ratio loans.
“The drumbeat continues. Inflation is increasing, as are deficits, and the economy and job market continue to look strong, and rates are higher as a result,” said Mike Fratantoni, chief economist for the MBA. “This upward move in rates is coming right at the start of the spring buying season and is a headwind.”
Mortgage applications to purchase a home fell 6 percent for the week and were barely 3 percent higher than a year ago. Affordability is weakening, as home prices continue to rise, due to the low supply of homes for sale. With mortgage rates now more than half a percentage higher than at the start of the year, homebuyers have already lost some purchasing power.
“This means that just by waiting about six weeks to buy a home, someone buying the typical U.S. home would be paying an extra $ 564 per year on their mortgage. Over the lifespan of a 30-year mortgage, that adds up to nearly $ 17,000,” said Aaron Terrazas, senior economist at Zillow. “In more expensive markets, the increase is even higher.”
Borrowers are now turning more to adjustable-rate mortgages, which have lower interest rates but can be more risky because they are shorter term. The ARM share of activity increased to 6.4 percent of total applications.