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As US mortgage rates rise, refinancing falls to two-month low
A RISE in US mortgage rates to a more than four-year high reduced refinancing activity on existing home loans in the latest week to the weakest level since last December, Mortgage Bankers Association (MBA) data released on Wednesday suggested.
But home buyers have not been deterred by the higher borrowing costs, with an increase in applications for loans to purchase homes, according to the latest mortgage application figures from the Washington-based industry group.
"It's going to be a tough refi year. It's going to be a purchase market this year," said Mark Palim, deputy chief economist at Fannie Mae, the mortgage finance provider.
MBA's index on refinancing applications in the week ended March 9 fell 2.2 per cent to 1,159.3, the lowest level since the week of Dec 29.
The refinance share of all mortgage applications shrank to 40.1 per cent, the slimmest proportion since September 2008, the height of the global credit crisis. That compared with 41.8 per cent the previous week, MBA said.
Much of the current refinancing activity is driven by homeowners looking to borrow against the rising value on their homes rather than those scouting to reduce their monthly mortgage payments, according to Mr Palim.
Meanwhile, MBA's index on loan requests to buy a home rose 3.4 per cent to 246.5 last week, a five-week high.
"At this point, it's a positive sign while supplies are very tight in many parts of the market," Mr Palim said.
The rebound in purchase mortgage demand lifted the group's total application index to 387.4 last week, the highest level in a month.
Average interest rates on 30-year conforming mortgages, or loans whose balances are US$453,100 or less, rose to 4.69 per cent, the highest since January 2014 and four basis points higher than the prior week.
Other 30-year mortgage rates on average were down one basis point to up five basis points on the week, while average 15-year mortgage rates fell to 4.07 per cent.
Home loan rates have increased in line with US bond yields on concerns about rising inflation and reduced stimulus from central banks amid an improving global economy. REUTERS