US weekly mortgage demand plunges as rates rise

U.S. home loan demand fell sharply in the last week, as fixed mortgage rates rose from near all-time lows.

The total loan applications index, a measure of mortgage loan application volume, fell 14.4 percent on a seasonally adjusted basis from a week earlier, while applications for refinancing loans decreased 16.5 percent, the Mortgage Bankers Association (MBA) said in a report on Wednesday.

The markets had expected home buyers to become cautious following the Fed’s plan to buy large quantities of Treasury securities, which could have a major influence on the mortgage and bond interest rates.

“Rates increased sharply last week due to stronger economic data and lingering uncertainty regarding the structure and impact of the Fed’s QE2 program. Mortgage applications, particularly for refinances, dropped in response,” said Michael Fratantoni, MBA’s Vice President of Research and Economics.

The seasonally adjusted Purchase Index also dropped 5 percent from one week earlier.

The average contract interest rates for 30-year fixed rate mortgage increased to 4.46 percent from 4.28 percent in the previous week, while 15-year fixed-rate mortgages rose to 3.87 percent from 3.64 percent.