As home loan rates continued to rise once again in the last few weeks, consumers have reacted by applying for fewer refinances and buying fewer homes. This week saw a particularly substantial drop in the number of people who wanted to get a better rate on their mortgage.
The number of refinances nationwide dipped at a seasonally adjusted rate of 24.6 percent in the week ending December 17, leading to an 18.6 percent drop in the overall mortgage application market, according to the latest statistics from the Mortgage Bankers Association. On an unadjusted basis, the market slipped an even 20 percent.
Meanwhile, consumers also sought fewer new purchases, as the number of applications dipped 2.5 percent on a seasonally adjusted basis, the report said. However, without adjustments, that figure was 4.9 percent, and 8.4 percent lower than it was in the same period last year.
“Refinance application volume dropped sharply this week as mortgage rates held near six month highs,” said Michael Fratantoni, the MBA’s vice president of research and economics. “Purchase applications fell for a second week, with the level of applications little changed over the past month, indicating that home sales are likely to remain relatively weak over the next few months.”
In all, refinances made up 72.3 percent of the total market, down from 76.7 percent the previous week, and the lowest share since early June, the report said.
Mortgage rates bottomed out at all-time lows several months ago and have been gradually climbing again in recent weeks. However, many consumers still pay an interest rate considerably higher than the current levels.