By Ryan Jackson
After record all-time mortgage rates triggered a refinancing frenzy, applying for lower rate home mortgages dropped like a bomb last week as rates soared to the highest levels in weeks. The Mortgage Bankers Association refinancing index dropped 9% to lead the summer slowdown.
The seasonally adjusted purchase index fell under just one-percent (0.9) from the prior week. The sudden drop-off in refinances was caused by a steady three week hike in mortgage rates set by bankers, which hit historic lows the last week of July, reaching 3.49%, according to Freddie Mac.
U.S. Treasury bonds have been on a consistent path to higher rates hitting 1.85% after reaching 1.38% on the benchmark 10-year yield. Banks and mortgage lenders typically follow Treasuries as a guide post to set their lending rates for borrowers, including home mortgages.
However, since the over-whelming majority of home buyers are unable to qualify for the best rates available and fewer applicants meet the stringent guidelines required by lenders the wave of refinancing activity came quickly to an end with higher rates.
The average fully contracted rate on a 30-year fixed rate mortgage rose to 3.86%, a jump from 3.76% a week earlier, according to the Mortgage Bankers survey.
The average fully executed interest rate on 15-year fixed-rate mortgages increased to 3.15%, a three basis point move higher. The average mortgage rate for 5/1 adjustable rate loans increased a single basis point to 2.74%.
In July, the investor share of loan applications for home purchases rose to 5.7% from 5.5% in June. The change was driven by an 8.7% gain in the west. In addition, the share of purchase mortgages for second homes increased to 5.8% during the month from 5.6% in June.