Demand for purchase mortgages fell last week rates as interest rates surged, ending three consecutive weeks of gains in purchase loan applications, the Mortgage Bankers Association said in releasing the results of its Weekly Mortgage Applications Survey.
Demand for purchase loans for the week ending Nov. 12 was down a seasonally adjusted 5 percent compared to the week before, and requests for refinancings fell 16.5 percent to the lowest level since July.
"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, in a statement.
QE2 — the Federal Reserve’s plan to buy $600 billion in bonds in a second round of quantitative easing — was intended to push bond yields down, making borrowing more affordable and stimulating the economy. Bond yields have gone the other direction, in part because of fears that QE2 will also spark inflation.
According to the MBA, interest rates for 30-year fixed-rate mortgages increased to an average of 4.46 percent last week, up from 4.28 percent the week before. Points increased to an average of 1.13 from 1.04 (including the origination fee).
That put rates about where they were during the first week of September, the MBA said.
The average contract interest rate for 15-year fixed-rate mortgages increased to 3.87 percent from 3.64 percent, with points decreasing to 0.91 from 1.08 (including the origination fee), the highest since the week ending Sept. 17, the MBA said.