As rates increase by one point, refinancing dries up to lowest level in 2-1/2 years
Rising rates, up nearly one full percentage point from October, are drying up refinancing demand and are cutting into already weak demand for home purchases. The refinancing index fell 11.4% in the February 11 week to the lowest level in more than 2-1/2 years. The purchase index fell 5.9%. The average rate for 30-year mortgages was little changed at 5.12%. Via MBAA:
The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending February 11, 2011. The Market Composite Index, a measure of mortgage loan application volume, decreased 9.5 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 7.9 percent compared with the previous week.
The Refinance Index decreased 11.4 percent from the previous week and is the lowest Refinance Index recorded in the survey since the week ending July 3, 2009. The seasonally adjusted Purchase Index decreased 5.9 percent from one week earlier. The unadjusted Purchase Index decreased 0.9 percent compared with the previous week and was 18.2 percent lower than the same week one year ago.
"Mortgage rates remained above 5 percent last week, up almost a full percentage point from their October lows, and refinance volume continued to drop," said Michael Fratantoni, MBAâ€™s Vice President of Research and Economics. "Applications for home purchases also declined on a seasonally adjusted basis. Buyers have not returned to the market as rising rates have reduced affordability, to some extent."
The four week moving average for the seasonally adjusted Market Index is down 4.5 percent. The four week moving average is down 1.9 percent for the seasonally adjusted Purchase Index, while this average is down 6.2 percent for the Refinance Index.