An increase in mortgage rates caused the number of applications for home loan refinances to fall by a seasonally adjusted 10.1 percent in the week ending March 25, according to the latest statistics from the Mortgage Bankers Association. This led to all home loan applications declining 7.2 percent, as a result of purchases dipping 1.7 percent.
“Treasury and mortgage rates increased towards the end of last week, as global markets calmed following the recent crises in Japan and the Middle East,” said Michael Fratantoni, MBA’s vice president of research and economics. “Refinance volume predictably fell in response to these rate increases. As rates climb back to 5 percent, fewer homeowners have both the incentive and the ability to refinance.”
The drop in refinance applications led this option’s share of the total mortgage market to fall to just 64.3 percent, down from 66.4 percent in the previous week, the report said. This was the second lowest level for the refinance share observed since last May.
Refinances become less popular when mortgage rates begin to approach or top 5 percent, but some studies have found that most consumers refinancing at this level would still save considerably on their existing mortgage payments.