Rise in Rates Reduces Demand for New Mortgages
Applications for U.S. home loans fell for a second straight week and higher interest rates reduced refinancing activity, data from an industry group showed Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 4.6 percent in the week ended Aug. 16.
The decline came as 30-year mortgage rates rose 12 basis points to 4.68 percent, matching the year's high first hit in July.
Interest rates spiked in late May after the Federal Reserve signaled it could begin scaling back its $85 billion in monthly bond purchases by the end of the year, with investors now betting it could happen as soon as September.
Prospects of the Fed tapering its stimulus has made financial markets jittery. This week, U.S. benchmark 10-year Treasury yields hit a two-year high of 2.9 percent, more than a percentage point above their level in May.
Demand to refinance existing loans has declined as rates have climbed. The refinance index shed 7.7 percent last week, its biggest weekly fall since late June, and is down 62.1 percent since peaking in the week ending May 3. The refinance share of total mortgage activity slipped to 62 percent from 63 percent the prior week.
Rates remain fairly low by historical standards, however, and the gauge of loan requests for home purchases, a leading indicator of home sales, rose 1.2 percent, after falling 5.4 percent the previous week.
The survey covers more than 75 percent of U.S. retail residential mortgage applications, according to MBA.
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