A slight rise in interest rates headed off mortgage refinancing demand in early February, putting a drag on total mortgage application volumes after a strong January.
Mortgage applications [1], including both purchase and refinance volumes, fell a seasonally adjusted 9.0 percent week-over-week for the week ending February 6, the Mortgage Bankers Association [2] (MBA) said Wednesday.
MBA's refinance application index dropped 10 percent week-on-week, accompanying a small increase in the average 30-year fixed rate to 3.84 percent. The decline saw the refinance share of mortgage activity slip back down to 69 percent of total applications compared to 71 percent at the end of January [3].
Helped by rock-bottom rates and lower annual Federal Housing Administration (FHA) insurance premiums, refinance applications finished out January up about 54 percent from the month prior, signaling the start of what some analysts anticipate will be a new "mini-boom" for remortgaging.
Paul Diggle, property economist for Capital Economics [4], said the firm expects to see refinance volumes jump by about 200 percent in the first half of 2015, though that prediction may fall short if consumers have a bad reaction to interest rates ticking upward again. Most projections call for rates to push up to nearly 5 percent by the end of this year.
Meanwhile, MBA's seasonally adjusted measure of purchase loan applications fell 7 percent week-over-week. Unadjusted, the index was down 1 percent on a weekly basis, floating just above where it was at this time last year.