The recent rise in mortgage rates to a high that has not been seen since last summer left application activity broadly unchanged over the past week, with the exception of a slight increase in the purchase market.
According to the Mortgage Bankers Association, total claims were up just under 0.5% compared to the previous week. Apps withdrawn for refinancing rose only 0.1% and seasonally adjusted purchase apps rose 2% in the week ended February 26.
The small increase in purchase apps could be due to a recent surge in indicative yields on 10-year government bonds. The 10-year year started near 0.9% in 2021 but has climbed, peaking at around 1.5% last week before subsiding. On Tuesday evening, the 10-year ratio was just over 1.4%
"There has been quite a step in the decade," said Michael Franco, CEO of SitusAMC. "It could come down again, but given the added incentives likely to come out, the infrastructure bills and the bond market concerns about all of that, I think it might be a little stickier now."
Sometimes the refinance is actually raised when interest rates rise as this causes some borrowers to act for fear of further increases. However, in the long run, a rate hike usually leads to decreased activity. Refi market share fell from 68.5% in the week ending February 19 to 67.5%.
Homebuyers tend to increase their market share when interest rates rise, and they also saw a seasonal spike last week.
"Purchase requests increased and the number of government requests – likely first-time buyers – decreased the average loan size for the first time in six weeks," Joel Kan, associate vice president of environmental and industry forecasting for the MBA, told a press release.
Overall, the share of loans in the state market increased as follows: Federal Housing Administration loans increased from 11.2% to 12.1%; Department of Veterans Affairs guaranteed products increased from 11.9% to 12.3% and U.S. Department of Agriculture mortgages rose 0.4% from 0.3%
The average total loan size was $ 336,200, up from $ 344,800 the previous week. The average purchase loan size was $ 412,300 and the average refinancing loan size was $ 299,600, compared to $ 418,000 and $ 311,100, respectively, the previous week.
The state's average loan size was $ 262,100, almost the same as the previous week's $ 262,300.