Mortgage Applications Today: Home Loan Demand Drops 3.8% as Rates Increase

Home loan applications decreased 3.8% for the week ending Dec. 12, according to the Mortgage Bankers Association. That's down from the prior week when mortgage applications increased.

The Market Composite Index, a measure of mortgage loan application volume, decreased 3.8% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 5% compared with the previous week. 

The Refinance Index decreased 4% from the previous week and was 86% higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 3% from one week earlier. The unadjusted Purchase Index decreased 7% compared with the previous week and was 13% higher than the same week one year ago.

The refinance share of mortgage activity increased to 59% of total applications from 58.2% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 7.2% of total applications.

The decrease in applications comes as mortgage interest rates for a 30-year fixed home loan increased to 6.22% for the week ending Dec. 11, according to Freddie Mac.

The Federal Housing Administration (FHA) share of total applications decreased to 19.5% from 20.2% the week prior. The Veterans Affairs loans share of total applications increased to 16.6% from 16.4% the week prior. The USDA share of total applications increased to 0.4% from 0.3% the week prior.

"Mortgage rates inched up last week following the FOMC meeting, as investors interpreted the comments to signal that we are near the end of this rate cutting cycle. As a result, mortgage applications declined slightly," said Mike Fratantoni, MBA’s SVP and chief economist.

"Purchase application volume typically drops off quickly at the end of the year, and this shifts the mix of the business, with the refinance share reaching 59 percent last week, the highest level since September. However, refinance activity has remained mostly the same for the past month as rates continue to hold at around the same narrow range."

Contract rates

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($806,500 or less) increased to 6.38% from 6.33%, with points increasing to 0.62 from 0.60 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.  The effective rate increased from last week.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $806,500) decreased to 6.44% from 6.46%, with points increasing to 0.41 from 0.35 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.  

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 6.12% from 6.08%, with points increasing to 0.82 from 0.72 (including the origination fee) for 80% LTV loans.  The effective rate increased from last week.

The average contract interest rate for 15-year fixed-rate mortgages increased to 5.72% from 5.71%, with points increasing to 0.74 from 0.64 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.

The average contract interest rate for 5/1 ARM increased to 5.63% from 5.51%, with points decreasing to 0.35 from 0.78 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week. 

Mortgage rates calculated

Mortgage rates are calculated by various factors in the economy, and the length of your loan will also figure into the mortgage rate you qualify for.

The 30-year mortgage rate is tied to the yield of the 10-year Treasury note, according to Fannie Mae. As the yield on the 10-year Treasury note moves, mortgage rates follow.

The yield on the 10-year Treasury note is determined by expectations for shorter-term interest rates in the economy over the duration of a bond, plus a term premium.