Refinance Applications Fall as Rates Rocket

Mortgage applications continued to fall last week following a sizable spike in interest rates, the ""Mortgage Bankers Association"":http://mbaa.org/default.htm (MBA) reported in its Weekly Mortgage Applications Survey.

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The survey's Market Composite Index, a measure of mortgage loan application volume, dropped 3.0 percent (both seasonally adjusted and unadjusted) for the week ending June 21.

The Refinance Index fell 5 percent from the previous week, dipping to its lowest level since November 2011. The refinance share of total mortgage activity also declined, falling to 67 percent--the lowest level since July 2011.

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Meanwhile, the seasonally adjusted Purchase Index actually rose, increasing 2 percent on a seasonally adjusted basis and 1 percent unadjusted. Last week's Purchase Index was 16 percent higher than the same week last year.

""Interest rates moved up sharply following the Federal Reserve press conference last Wednesday where it was indicated that the Fed could begin tapering their asset purchases later this year,"" said Mike Fratantoni, VP of research and economics for MBA. ""Mortgage rates increased by the most in a single week since 2011, and refinance application volume dropped to its lowest level in almost two years.""

Fratantoni also noted that government purchase applications declined further last week--""likely a function of the recent increase in FHA [Federal Housing Administration] mortgage insurance premiums""--to a share of 28 percent, the lowest level in the history of that series.

The average contract interest rate for a 30-year fixed-rate mortgage was 4.46 percent last week, MBA reported, the highest rate since August 2011. Points fell to 0.35 for 80 percent loan-to-value ratio loans.