Updated from 10:45 a/m.
Mortgage applications dropped after interest rates rose to their highest levels in the past month, according to a survey released today by the Mortgage Bankers Association.
The association said that its index of mortgage loan applications, a measure of mortgage loan applications, fell to 727.3 for the week ended Nov. 5 from a week earlier, a drop of 4.5% on a seasonally adjusted basis.
The average rate for a 30-year, fixed-rate mortgage increased to 5.69% from 5.65% a week earlier on loans with an 80% loan-to-value ratio. Points, including origination fees, increased from 1.36% from 1.26%. Rates had been as low as 5.54% in late October.
While both long- and short-term interest rates have been on the rise in recent weeks, with the
expected to increase short-term rates by a 0.25% today, mortgage rates are actually lower now than a year ago.
The average rate on a 30-year, fixed rate mortgage for the week ending Nov. 7, 2003, according to the association, was 5.94% -- compared with 5.69% for the current survey. Major mortgage lender
, for example, reported yesterday that its October loan fundings were 1% higher than in October of 2003.
Mortgage rates don't tend to move with fed fund rates, which are short-term rates that banks charge one another, but with longer-term rates, typically the 10-year Treasury bond. Even though the Fed has been increasing short-term rates, the bond market has been resisting a rise in long-term rates, fearing a weaker economy ahead.
But with a jobs report that was stronger than expected on Frirday, interest on the 10-year bond has spiked, leading to the possibility that mortgage interest rates will continue to rise as well.
In its survey for last week, the association found that rates for 15-year, fixed-rate mortgages increased to 5.08% from 4.98% a week before. Points remained at 1.33% on an 80% loan-to-value mortgage. In late October, the average rate was 4.90%.
The average rate for one-year adjustable-rate mortgages or ARMs rose to 4.03% from 3.96%, with points decreasing to 1.05% from 1.18% the previous week on 80% loan-to-value mortgages. The average rate had been as low as 3.87% in mid-October.
The refinance share of the market decreased during the week, from 45.2% of total applications, while the ARMs portion increased to 35.3%, up from 34.4%.
The approximately 2,900 members of the association include mortgage companies, mortgage brokers, commercial banks and thrifts.