Demand for mortgages weakened last week south of the border, despite a brief respite from rising interest rates.
Figures released Wednesday by the U.S. Mortgage Brokers Association show total mortgage application volume fell 1.9% seasonally adjusted, from the previous week. Volume was 5.5% lower than the same week one year ago.
Refinancing led the way down. The share of those applications fell to the lowest level in 10 years, down 2% for the week and off nearly 13% from a year ago. Refinances made up just 38% of total loan activity.
With interest rates higher than they were a year ago, and lending still relatively tight, there is less and less incentive for borrowers to refinance. For those who want to take cash out of their homes, more are now turning to second, home equity loans, rather than refinancing their primary mortgages and subsequently losing their rock-bottom rates.
Last week, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) decreased to 4.66% from 4.69%, with points increasing to 0.46 from 0.43 (including the origination fee) for 80% loan-to-value ratio loans.
Potential buyers, who are less sensitive to weekly rate moves, are either not enticed by what they're finding on the market this spring, or, more likely, they can't afford it. Mortgage applications to purchase a home fell 2% for the week and were 0.5% lower than a year ago.
The drop is surprising, given that this is the heart of the spring housing season, and a stronger economy would suggest higher demand. Sentiment for buying, however, has been volatile, falling sharply in February and then bouncing back in March, according to a monthly survey by Fannie Mae.
