Mortgage Rates Leap Upward, Refinance Applications Stall

By Kyle Chezum Updated on 2/9/2011

2/09/11

Mortgage applications decreased again this past week as mortgage rates on 30 year fixed loans skyrocketed.  Interest rates increased from 4.81% to 5.13%, an unexpected and impressive leap that highlights the inherent volatility in the marketplace rather than recovery.  Mortgage rates have wavered upward and downward with minute variance since the start of the year.

The Mortgage Bankers Association released a report outlining the recent changes in the mortgage sector, and on the surface, at least, the news is not good for home buyers or homeowners seeking to refinance.  Refinance activity has decrease substantially.  A previous uptick in mortgage rates led to increased refinance activity due to fear that rates were on their way up for good, but last week’s interest increase doesn’t appear to have had this effect.

Just 66.6% of all mortgage activity came in form of new refinance applications.  This is a significant decrease since the historical low rates seen during the fall of last year.

Michael Fratantoni, vice president and economist with the MBA, spelled out the issues clearly in the report.  “We are at the beginning of the spring buying season, but purchase volume remains weak on a seasonally adjusted basis,” he said.  "Mortgage rates increased last week as many incoming economic indicators continue to show stronger growth than had been anticipated. Refinance volume continues to be low, as fewer homeowners with equity have any incentive to refinance.”

Many homes are still underwater, as home prices have not followed mortgage rates upward.  Property equity is rare and diminutive when present.  The refinance boom may have ended almost entirely.

The market is still waiting on a substantial increase in home purchase mortgage applications.