Mortgage Applications Decline as Rates Move Higher

June 13, 2018 — 3:56 PM EDT

Thanks in part to a return of rising mortgage rates, applications for new homes declined 1.5% for the week ending June 8. According to the Mortgage Bankers Association's Weekly Mortgage Application Survey, loan volume decreased 1.5% on a seasonally adjusted basis compared with a week earlier. The results included an adjustment for the Memorial Day holiday. On an unadjusted basis, loan applications increased 9% compared with a week earlier.

The Refinance Index declined 2% week over week while it increased 9% on an unadjusted basis. With interest rates rising again, more existing homeowners are losing the chance to refinance into a cheaper mortgage. The Mortgage Bankers Association said that the refinance share of mortgage activity remained unchanged from a week earlier, representing 35.6% of all applications. Meanwhile, adjustable-rate mortgages decreased to 6.8% of all loan applications.

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At the same time that mortgage applications are declining, mortgage interest rates are moving higher after a couple of weeks of declines. According to the Mortgage Bankers Association, the average interest rate for a 30-year fixed-rate mortgage with loan balances of $453,100 or less increased to 4.83% for the week ending June 8, up from 4.75% in the week earlier. For loans of more than $453,100, the average rate on a 30-year fixed-rate loan increased to 4.74% from 4.70%. The average rate on a 15-year fixed-rate mortgage increased to 4.23% from 4.21% week over week. As for a 5/1 ARM, the Mortgage Bankers Association said that the average contract interest rate increased to 4.11% from 4.08% in the same time period.

While some buyers, particularly first-time ones, are extremely price sensitive and as a result can't afford an increase in mortgage rates, also weighing on applications are increasing property values and a dearth of affordable houses to purchase. According to online real estate company Zillow, U.S. home values jumped in April, with the median at $215,600, an 8.7% increase from the same time frame last year. This marks the fastest increase in home values since June 2006, when the housing market was beginning to slow down from the double-digit growth seen during the housing bubble. Zillow noted that, by September 2007, the median home value started its descent. This time around, home values have been moving higher since the early part of 2015, when the increase was under 5% year over year. Since the summer of 2015, the values started increasing and have been moving higher ever since, said Zillow.