Mortgage applications slow down as rates spike

Declines were seen across all loan types

Mortgage applications slow down as rates spike

Mortgage applications fell from last week as interest rates rose above 3%, with the share of refinance applications declining to its lowest level in three months.

The Mortgage Bankers Association’s Market Composite Index was down 6.9% on a seasonally adjusted basis for the week ending October 01. The finance index dropped 10% week over week, while the purchase index dipped 2% from the previous week.

“Mortgage applications to refinance dropped almost 10% last week to the lowest level in three months, as the 30-year fixed-rate increased to 3.14% – the highest since July,” said Joel Kan, associate vice president of economic and industry forecasting at MBA.

Read more: Mortgage rates cross 3% threshold for the first time since June

The refinance share of mortgage activity shrank from 66.4% to 64.5% of total applications. The adjustable-rate mortgage (ARM) share of activity held steady at 3.4% of total applications. 

“Higher rates are reducing borrowers’ incentive to refinance, as declines were seen across all loan types,” Kan said. “Purchase activity also fell, driven by a drop in conventional loan applications. Government purchase applications were up over 1%, but that was still not enough to bring down the average loan balance of $410,000. With home-price appreciation and sales prices remaining very elevated, applications for higher balance, conventional loans still dominate the mix of activity.”