The recent run-up in long-term market interest rates appears to be weighing on mortgage lending.
The Mortgage Bankers Association Wednesday said its survey of activity for the week ended March 18 was down 9.5% from a week ago and 39.3% from a year ago. Mortgage lending has now declined in five of the past six weeks.
Purchases decreased by 3.5%, while applications for refinancing slumped 16.5%.
"The increase in mortgage rates has reduced application activity across the board, particularly for refinances. Refinance applications are down more than 60% relative to this time last year," the MBA said.
Most mortgage rates mirror the yield on the 10-year Treasury note, which has jumped from 4.00% in early February to an intraday high of 4.62% Tuesday, following the
latest increase in the federal funds rate. The yield is now at its highest level since last July, reflecting concerns that the central bank will take a more aggressive approach in raising interest rates because of growing inflationary pressures.
Refinancing constituted 39.5% of all mortgage activity, down from a 42.9% share in the previous week. Adjustable-rate mortgage, or ARMs, accounted for 33.5% of all activity, vs. 32.4% in the previous week -- perhaps reflecting consumers' anticipation of the Fed's latest quarter of a percentage-point increase in short-term rates.
The average rate on 30-year fixed-rate mortgages increased to 5.95% from 5.91% a week ago.
The average rate for 15-year fixed-rate mortgages increased to 5.49%, vs. 5.47% in the previous week.
With rates rising, it becomes less attractive for home owners to refinance by trading in a higher rate on an existing mortage for a lower one on a new note because any savings may be offset by closing costs.