Markets finally settled last week after several months of volatile interest rates. However, that did not help the mortgage business. Overall mortgage application volume dropped 3.3 percent on seasonally adjusted data last week compared to previous weeks.
According to the Mortgage Bankers Association, refinance volume dropped further, down 5 percent from the past weeks, as relatively higher rates scared off borrowers. Refinance volume was 4.5 percent down than the same week a year ago, when rates were significantly lower.
The median contract interest rate for fixed-rate mortgages with conforming loan balances of $417,000 or less dropped to 3.93 percent from 3.94 percent, with points dropping to 0.35 from 0.42, origination fee included, for 80 percent loan-to-value ratios, according to a report from CNBC.
Lynn Fisher, MBA's vice president of research and economics, stated that there were fewer borrowers remaining who were able to make use of lower rates. The drop in average refinance loan size was also a key feature of a suffering refinance market. Borrowers with bigger loan balances chose to be more rate-sensitive. As refinance applications surged, average loan size went up. As the market returned to a more average level of refinance applications, the combination of borrowers returned to normal and median loan size dropped, according to a report from 24/7 Wall Street.
Mortgage applications for home purchases dropped 1 percent for the week, despite hotter temperatures and what economists expected to be an increasing pace for the spring housing season. However, they were 25 percent more than the same week one year ago. The lack in inventory of homes for sale continued to put an upward push on home costs. Economists expect that as 2016 goes on, the market will see those year-over-year sales numbers start to decline.
MBA further added that in the previous week's average rate for mortgage loan for the fixed-rate 30-year mortgage lowered from 3.94 percent towards 3.93 percent.
