NEW YORK (TheStreet) -- Mortgage applications are plunging as mortgage interest rates continue to climb.
According to the latest survey by the Mortgage Bankers Association, mortgage applications decreased 13.5% in the week ended Sept.6 from a week earlier, on a seasonally adjusted basis.
The Market Composite Index declined 23% on an unadjusted basis. As has been the case since rates began their rise in May, refinance applications led the decline, plunging 20%. Refinance applications have plummeted 71% from their peak level in May and are at the lowest level since June 2009.
The share of refinances to total applications dropped to 57% from 61% in the previous week. Refinances as a share of total applications were at the lowest level since April 2010.The MBA's seasonally adjusted Purchase Index was down 3% from a week earlier. On an unadjusted basis, purchase applications declined 14%, though they were still 7% higher than a year earlier. The average contract interest rate for 30-year fixed-rate mortgage loans with conforming loan balances ($417,000 or less) increased to 4.80% from 4.73% during the week, with points increasing to 0.46 from 0.33 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The average contract interest rate for 30-year fixed-rate mortgage loans with jumbo balances (greater than $417,000) increased to 4.84% from 4.71%. The average contract interest rate for 30-year fixed-rate mortgage loans backed by the Federal Housing Administration (FHA) increased to 4.56% from 4.48%. Trulia economist Jed Kolko noted in a blog post that this is fairly typical behavior of applications in response to rising interest rates. Refinance applications typically fall 45% in the month of a spike in interest rates and continue to fall in the following two months. New home sales and existing home sales dropped 3 months after a spike, so the full impact of May's interest rate climb should be seen in August sales which will be reported later this month. Still, compared with the rate impact on refinancing, the effect on sales and purchase applications isn't as significant.
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