A combination of rising interest rates and home prices this year is shaking the resolve of homebuyers and homeowners who no longer see an incentive to refinance. As a result, mortgage applications took another dip for the week ending April 6, falling 1.9% from the previous week, according to data from the Mortgage Bankers Association (MBA).
Refinance and purchase applications each fell 2% on a seasonally adjusted basis from one week earlier, the MBA reported. Refinance activity dropped to its lowest level – 38.4% – since September 2008. With rates up this year over previous years' record lows, more borrowers are applying for adjustable-rate mortgages, which rose to 6.3% of total applications.
[Thinking of buying a home? Check out Investopedia's mortgage calculator to determine what you can afford.]
Bucking the general downward trend in new home loans, applications for some government-insured loans increased. Federal Housing Administration, or FHA, loans saw an 11% increase in applications over 10.1% in the previous week, and applications for U.S. Department of Veterans Affairs loans also climbed to 10.9% of total applications from 10.3%.
Meanwhile, interest rates for 30-year fixed conventional loans slipped to 4.66% from 4.69%. Rates also fell for FHA loans (to 4.66% from 4.74%) and for 15-year fixed loans (to 40.8% from 4.09%).
Rising home prices are a key reason why homebuyers are being sidelined from the housing market, and the price increases are also saddling more Americans with higher debt. About one in five conventional loans closed went to borrowers spending more than 45% of their monthly incomes on their mortgage payment and other debts, housing data firm CoreLogic told The Wall Street Journal. That's the highest proportion since the housing crisis and is nearly triple the proportion of such loans made in 2016 and the first half of 2017, CoreLogic reported.