Borrowers may have missed an opportunity to get the last of the low rates, as it now appears interest rates are moving decidedly higher.
Mortgage application volume fell 2.7 percent last week, according to the Mortgage Bankers Association's seasonally adjusted report. Volume was 4.5 percent lower than a year ago. The weakness was most pronounced in applications to refinance a home loan. That volume fell 4 percent to its lowest level since August 2008. Refinance volume is off nearly 17 percent from a year ago, when interest rates were lower. Most borrowers today have little incentive to refinance after a boom a few years ago, when interest rates hit record lows. Rates fell slightly last week, but that was temporary. Mortgage applications to purchase a home, which are less rate-sensitive week to week, also fell, down 2 percent for the week. Volume was just 4 percent higher than one year ago. Volume should be considerably higher, given the strong demand for housing in an improving economy, but low supply and high competition is holding buyers back. Cash is currently ruling the market, as more investors come back, looking to cash in on fast-rising prices.
Interest rates then moved to a seven-year high yesterday, after a major sell-off in the bond market. Mortgage rates loosely follow the yield on the 10-year Treasury. The sell-off came after a stronger-than-expected retail sales report, but the real momentum began when interest rates broke through a recent high, resulting in one of the heaviest selling days of the year to date.