Mortgage Applications Dive As Inflation Surges, Rates Jump
Mortgage applications took a nose dive during the past week, falling 22.6 percent during the week ended February 15 as inflation surged and mortgage rates rose sharply. The Mortgage Bankers Asssociation reported Wednesday that a widely-watched index of application activity dropped to 822.8 last week, compared to 1063.5 one week earlier. The application index is calibrated to March 16, 1990; a reading of 822.8 means that application activity was roughly 8.2 times greater than when the index was first established. Refinance activity fell steeply, dropping 27.9 percent to 3533.8 from 4901.5 the previous week, the MBA reported. Applications for conventional and government-sponsored purchase mortgages dropped as well, as borrowers saw mortgage rates rise while the bond market quickly shifted its focus towards inflationary concerns. Such concern appears to have been warranted: the U.S. Labor Department reported Wednesday that consumer prices rose a seasonally-adjusted 0.4 percent last month, with core inflation jumping 0.3 percent in January -- its biggest gain since June 2006. The MBA reported that the average contract rate for 30-year fixed-rate mortgages had risen 37 basis points by last Friday to 6.09 percent, as a result. While updated rate surveys from Bankrate and Freddie Mac are set to be released tomorrow, early evidence suggests rates have jumped even further to start this week -- erasing nearly all of the rate drops that had driven a mini-refi boom to start 2008. Holden Lewis at Bankrate.com noted Monday that rates are "far above where they were just a week or two ago." He suggested that par on a 30-year fixed mortgage was at 6.25 percent or higher. The sharp drop in refinance activity was reflected in overall application volume mix; the MBA said that refinance share fell to 61.7 percent of all activity, versus 67.4 percent one week earlier. For more information, visit http://www.mortgagebankers.org.