Weekly mortgage demand pulls back, as interest rates rise for the first time in 9 weeks

After a strong streak of gains, mortgage demand pulled back last week. An increase in mortgage rates, as well as increasing uncertainty about the economy, were the likely culprits.

Total mortgage application volume dropped 6.2% from the previous week, according to the Mortgage Bankers Association's seasonally adjusted index.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $806,500 or less, increased to 6.72% from 6.67%, with points increasing to 0.64 from 0.63, including the origination fee, for loans with a 20% down payment. That was the first increase in 9 weeks. Rates were 25 basis points higher the same week last year.

As a result, applications to refinance a home loan fell 13% for the week but were 70% higher than the same week one year ago. Refinancing has been seeing strong gains as interest rates dropped earlier

this month, but there are still a precious few who can benefit from a refinance, given the record low rates seen just three years ago. The percentages are skewing larger because the base volume is so small.

Applications for a mortgage to purchase a home were basically flat week-to-week, up just 0.1%. They were 6% higher than the same week one year ago.

"Purchase application volume inched up to its highest level in six weeks, led by a 3 percent increase in FHA purchase applications," said Mike Fratantoni, MBA's SVP and chief economist. "Growing inventories of homes on the market and steadier mortgage rates are supporting homebuying activity thus far this spring."

Mortgage rates moved a tiny bit lower to start this week, according to a separate survey from Mortgage News Daily, but really they have been moving around within about a 10 basis point range for close to three weeks. That could change today following the latest announcement on rates from the Federal Reserve and any unexpected commentary from its chairman.