Applications for U.S. home mortgages decreased last week as home refinancing activity dropped sharply offsetting an increase in purchases amid rising interest rates, an industry group said Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity decreased 2.4 percent to 710.1 in the week ended Feb 25, after dropping 0.6 percent the week before.
Higher interest rates have cut into refinancing activity for existing home loans, economists said.
“A quarter point rise in mortgage rates over the last few weeks has obviously cut into refinance volume,” Michael Cevarr, MBA’s director of member surveys, said in a press release.
Fixed 30-year mortgage rates averaged 5.74 percent last week, excluding fees, up 7 basis points from 5.67 percent the previous week. Rates were as low as 5.48 percent at the beginning of February.
The MBA’s seasonally adjusted index of refinancing applications fell 9.9 percent to 2281.1, after rising for four consecutive weeks.
Refinancings also dropped as a percentage of all mortgage applications, falling to 44.8 percent of all mortgage applications last week, from 49.3 percent the previous week.
Despite the rise in interest rates recently, mortgage rates continue to remain historically low, which encouraged U.S. consumers to apply for new home loans.
The MBA’s purchase index, a gauge of loan requests for home purchases, increased 5.3 percent to 440.0, more than erasing the 1.3 drop the previous week.
Applications for adjustable-rate mortgages made up 30.7 percent of total applications, unchanged from the previous week.
One-year adjustable-rate mortgage rates averaged 4.27 percent, up from 4.18 percent one week earlier.
The MBA’s survey covers approximately 50 percent of all U.S. retail residential mortgage originations, and has been conducted weekly since 1990.
Respondents include mortgage bankers, commercial banks and thrifts.
