U.S. Mortgage Rates Continue Higher And Depress Refinancings

The home mortgage market looks somewhat different given the recent surge in interest rates. The effective rate on a 15-year mortgage rose to 3.42% last week, up 53 basis points from early May and the highest level since April 2012. The Mortgage Bankers Association also reported that total applications gained just 5.0% w/w after four weeks of sharp decline. The total application index was off 29.1% from five weeks ago. Last week's improvement reflected a 5.0% rebound in applications to refinance an existing loan but they're still down by more than one-third from last year. Conversely, home purchase mortgage applications increased 4.7% last week (5.5% y/y), continuing the improvement since 2010.

Together with the rise in the 15-year mortgage rate was the effective rate on a 30-year fixed rate loan. It increased to 4.29% last week while the rate on a Jumbo 30-year loan jumped to 4.35%. The 87 basis point spread between 15- and 30-year loan rates set the record. The effective interest rate on an adjustable 5-year mortgage was 2.89%, up from its low of 2.59% at the beginning of May.

Applications for fixed interest rate loans fell 30.8% y/y while adjustable rate loan applications were off 3.0% y/y. The average mortgage loan size was $222,700. The average size loan for home purchases was $266,700 last week while for refinancings it was $202,500.

The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey covers roughly 50% of all U.S. residential mortgage applications processed each week by mortgage banks, commercial banks and thrifts. The figures for weekly mortgage applications are available in Haver's SURVEYW database.