According to Diana Olick of CNBC , a small increase in the interest rates has made a cut on the number of mortgage applications.
The Mortgage Bankers Association (MBA) disclosed that the total volume fell by 6.2 percent during the seasonally adjusted basis for the week that ends in September 4 against the earlier week.
Two weeks ago, application to refinance home loans had a dramatic increase ,but had fallen by 10 percent in the previous week. On the other hand, applications to purchase a house , which actually are less - rate sensitive , also fell by 1 percent earlier . But to compare the same week a year ago, the number of applications are still higher by 41 percent.
The MBA further reveals that the annual change is inflated because of the shift in Labor Day , reckoning from the first week of September of 2014 to the second week of the same month in 2015.
The decrease in refinance applications was actually " a reaction to a minute move higher in interest rates, as the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 4.10 percent from 4.08 percent, with points increasing to 0.39 from 0.37 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. Loan sizes also shrunk, after gaining the previous week, " Olick explained.
"The decline in the average loan size for both purchase and refinance applications last week showed again that borrowers with larger loans are much more sensitive to a given change in rates. The slight uptick led to a fairly sharp weekly drop in refinance volume, and purchase volume slipped as well," said the Chief Economist for the MBA, Mike Fratantoni.
Interest rates made no decisive move at the end of last week with the August jobs report just still being processed , enough to leave considerable uncertainty on whether or not the Federal Reserve will raise interest rates this month.
"Many market participants think the Fed will hike rates for the first time since the Financial Crisis, though just as many think they'll hold off until December at the earliest. Mortgage rates are not directly dictated by the Fed's policy rate, but they tend to move higher during periods where the Fed is raising rates, "noted Matthew Graham, the Chief Operating Officer of Mortgage News Daily.
