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Rising rates deter mortgage activity

November 18, 2010 - A number of families decided to hold off on their moving plans another week, a development that drove mortgage applications down.

The Mortgage Bankers Association reported that total mortgage volume declined 14.4 percent during the week ending November 12, though the results were not adjusted to account for the Veterans Day holiday. Purchase applications retreated 5 percent after posting three straight weeks of increases, an indication that fewer consumers sought mortgages to finance their eventual home purchase and relocation. Rising mortgage rates even deterred refinancing, which decreased 16.5 percent and now sits at its lowest level since July.

"Rates increased sharply last week due to stronger economic data and lingering uncertainty regarding the structure and impact of the [Federal Reserve's quantitative easing strategy]", said Michael Fratantoni, MBA's vice president of research and economics. "Mortgage applications, particularly for refinances, dropped in response."

Refinancing made up an 80.3 percent share of total mortgage activity, down from 81.7 percent the previous week.

Many consumers expected mortgage rates to dive after the Fed's plan to purchase $600 billion in Treasury bonds in order to ease interest rates. However, the Washington Post advised buyers not to hold off their moving plans any longer, since the Fed's actions were already factored into today's interest rates, meaning rates aren't expected to fall much further.
 

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