The volume of mortgage loan applications decreased 14.4% on a seasonally adjusted basis in the week ending Nov. 12, the Mortgage Bankers Association said early Wednesday.
Refinancing applications decreased 16.5% from the previous week to the lowest level observed since July. New-home purchase loan applications decreased 5% week-over-week, the first decrease after three consecutive weekly increases.
"Rates increased sharply last week due to stronger economic data and lingering uncertainty regarding the structure and impact of the Fed's QE2 program," said Michael Fratantoni, MBA's Vice President of Research and Economics. "Mortgage applications, particularly for refinances, dropped in response."
A total of 80.3% of all loan applications last week were for refinancing existing mortgages, slightly lower than the 81.7% share observed in the prior week.
One reason for the waning mortgage activity last week was higher mortgage rates. The average rate on a 30-year fixed mortgage increased to 4.46% from 4.28% in the prior week. It is the highest rate observed since Sept. 10.Record-low and near-record-low mortgage rates failed to spark robust demand for housing in recent months, but continue to have an effect on homeowners looking to lower their monthly payments through refinancing.
While any mortgage demand can be viewed in a positive light, the still-struggling housing market continues to be plagued by sluggish demand, in part because of the tight credit market and inability of many potential buyers to access the credit they need to finance a mortgage.
Many Americans suffer from negative equity, where the amount they owe on their home is higher than its value, making them unqualified for refinancing.
Homebuilders began construction on 11.7% fewer homes in October to an annualized rate of 519,000, far worse than the expected contraction rate. Applications for building permits, meanwhile, inched 0.5% higher to 550,000, from 547,000.