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NEW YORK (
TheStreet) -- Mortgage applications declined 11.7% from a week earlier as mortgage rates hit a two-year high, according to the Mortgage Bankers Association's weekly Mortgage Applications Survey.
The Market Composite Index, a measure of mortgage loan application volume, decreased 11.7% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 12% compared with the previous week.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 4.58%, the highest rate since July 2011, from 4.46%, with points increasing to 0.43 from 0.35 (including the origination fee) for 80% loan-to-value ratio loans. The effective rate increased from last week.
The average contract interest rate for 15-year fixed-rate mortgages increased to 3.64%, the highest rate since July 2011, from 3.55%.
Higher rates hurt refinancing volume, with the Refinance Index declining 16% from the previous week to the lowest level since July 2011.
Fewer Americans also applied for a fresh mortgage, with purchase applications declining 3% from one week earlier on a seasonally adjusted basis.
The unadjusted Purchase Index was down 4% from a week ago. Still, purchase applications are still up 12% from a year ago on an unadjusted basis. Housing analysts have said that the recent increase in interest rates will not derail the housing recovery as housing affordability is historically high and higher rates have been partially offset by expectations of higher home prices.
Still, the sudden and sharp increase in rates is likely to moderate the pace of home price gains in the coming months.
-- Written by Shanthi Bharatwaj in New York.