Loan Demand Stalls After 2018's First Rate Drop

March 21, 2018

Mortgage rates posted their first drop of the year last week, but it wasn’t enough to spur loan demand. Total mortgage application volume—for both refinancings and home purchases—decreased 1.1 percent last week compared to the previous week, the Mortgage Bankers Association reported Wednesday. Volume is now 5 percent lower than a year ago.

Last week’s drop was mostly stemmed from refinance applications. Refinance volume decreased 5 percent during the week and are nearly 19 percent lower than a year ago, when mortgage rates were much lower.

On the other hand, mortgage applications for home purchases did eke out a 1 percent increase during the week and are now 6 percent higher than a year ago. Purchase volume tends to be less reactive week to week than interest rates.

Interest rates began rising at the start of this year; last week offered borrowers the first relief from weekly increases. The average 30-year fixed-rate mortgage posted its first decrease of the year, dropping to 4.68 percent last week.

"Treasury rates declined slightly on average last week, as a mixed bag of economic news and geopolitical concerns made investors more cautious overall," says Joel Kan, an MBA economist. "A significant driver of the decline was retail sales data showing less-than-expected spending by U.S. households for the third month."

Source: “Mortgage Refinances Fall Even Further Despite First Rate Drop of 2018,” CNBC (March 21, 2018)