It didn’t take much to end the party in the refinance market.
A small tick higher in mortgage rates in late August, caused the sudden surge in refinances to retreat just as quickly. That pushed total mortgage application volume down 6.2% last week, compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Volume was 66% higher annually, as rates were still higher last year.
Rates increased for the first time since the week of July 12, causing mortgage applications to refinance a home loan to fall 8% for the week. They were still 167% higher than a year ago though. The refinance share of mortgage activity decreased to 62.4 percent of total applications from 62.7 percent the previous week.
Mortgage applications to purchase a home, which are less sensitive to rate changes, fell 4% last week and were just 2% higher than a year ago.
“The drop in rates this summer have not yet led to a significant boost in activity. Uncertainty over the near-term economic outlook and low supply of homes for sale continue to be the predominant headwinds for prospective homebuyers,” Kan said.
Consumer confidence in the housing market is still high, according to a monthly Fannie Mae survey, but there is a shortage of homes for sale on the low end of the market, where demand is strongest. That is where home prices are still rising fastest and borrowers have less wiggle room in their wallets. At the higher end, where listings are more plentiful, potential buyers are more sensitive to the latest swings in the stock market and the overall concern over a potential recession.