Refinance demand plummeted last week, with applications dropping by a seasonally adjusted 20 percent from the week before and falling to their lowest level in four years.
Higher mortgage rates have been putting the squeeze on refinancing in recent months, with applications declining by 71 percent since rates started climbing in May, according to the Mortgage Bankers Association's Refinance Index.
Home purchase loans holding their own
At the same time, the runup in mortgage rates has so far had little obvious impact on home purchase mortgages, with applications continuing to outpace their rate of one year ago. Applications for home purchase loans were down a seasonally adjusted 3 percent for the week, but were still running 7 percent ahead of their level for the same week one year ago.
Despite the fall-off in demand, refinancing still accounts for the majority of all mortgage loan applications, making up 57 percent of all applications, though that's their lowest share since the spring of 2010 and down considerably from the 80 percent-plus level where they've been for much of the past few years.
A gradually increasing share of refinancing is being conducted through HARP (Home Affordable Refinance Program), the federal program for refinancing low- and negative-equity mortgages. HARP accounted for 38 percent of all refinance applications last week.
Rates: Little premium charged for jumbo loans
Looking at mortgage rates, the MBA's rate survey showed that the average on 30-year fixed-rate loans rose to 4.80 percent last week, up from 4.73 percent previously. The average for jumbo mortgages, those with balances over $417,000, remained close to those on conforming loans, with an average of 4.84 percent last week, up from 4.71 percent previously, for 30-year fixed-rate mortgages.
The average on 30-year FHA loans was considerably lower, rising to 4.56 percent from 4.48 percent the week before, although that does not take into account the additional cost of FHA mortgage insurance.
Conventional 15-year fixed-rate mortgages rose to an average rate of 3.83 percent, up from 3.75 percent previously; while the average initial rate on 5/1 adjustable-rate mortgages (ARMs) rose to 3.59 percent, up from 3.49 percent the week before.
All figures are based on mortgages with an 80 percent loan-to-value ratio.