The lowest mortgage interest rates since November did little to encourage people to refinance their home loans or take out a new loan to buy a home.
Total mortgage application volume rose just 0.1 percent, seasonally adjusted, last week from the previous week, according to the Mortgage Bankers Association. Volume was nearly 22 percent lower that a year ago.
A sharp drop in rates usually prompts homeowners to refinance, but those applications rose just 2 percent for the week and are still down 40 percent from the same week one year ago, when rates were lower. So many people have already refinanced at rock-bottom rates that the pool of potential applicants is shrinking.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $424,100 or less decreased to 4.12 percent, from 4.14 percent, with points remaining unchanged at 0.38, including the origination fee, for 80 percent loan-to-value ratio loans.
“Last week, mortgage rates dropped to their lowest level since the week of the November 2016 election as investors sought safety given the tense geopolitical environment, especially the concerns with respect to North Korea,” said Mike Fratantoni, chief economist for the MBA.
Lower rates did nothing to spur homebuyers because the drop was not nearly enough to offset fast-rising home prices and a short supply of homes for sale. Mortgage applications to purchase a home fell 2 percent for the week but remain nearly 10 percent higher than a year ago.
One sign that buyers are struggling increasingly with high home prices is the jump in adjustable rate mortgage applications, which offer a lower interest rate. ARM volume now stands 13 percent higher than a year ago. In addition, FHA loan applications to purchase a home are only up 4 percent from a year ago. FHA loans are a favorite among young, first-time buyers with less money to put down on a home.
This week, the slide in interest rates came to a grinding halt after fears over North Korea subsided.
“Markets took solace in the absence of global nuclear war by buying stocks and selling bonds. Net selling pressure in bonds pushes rates higher,” wrote Matthew Graham, chief operating officer at Mortgage News Daily.