The Mortgage Bankers Association (MBA) said rising interest rates caused mortgage application activity to fall for the second straight time week during the period ended June 21. The Association's Market Composite Index, a measure of application volume, decreased 3.0 percent on a seasonally adjusted basis to its lowest level since November 2011. The Composite also fell 3.0 percent on an unadjusted basis.

The Refinance Index was down 5 percent from the week ended June 14 also to its lowest point since November 2011 and constituted a 67 percent share of application activity, the lowest share since July 2011, compared to 69 percent the previous week. Thirty percent of refinancing applications were for the Home Affordable Refinance Program (HARP), down one percent from the week before.

Refinance Index vs 30 Yr Fixed

The seasonally adjusted Purchase Index was up 2 percentage points from the previous week. The unadjusted Purchase Index rose 1 percent week-over-week and was 16 percent higher than one year earlier. The government share of purchase applications dropped to 28 percent, the lowest level in the history of this series. 

Purchase Index vs 30 Yr Fixed

"Interest rates moved up sharply following the Federal Reserve press conference last Wednesday where it was indicated that the Fed could begin tapering their asset purchases later this year," said Mike Fratantoni, MBA's Vice President of Research and Economics. "Mortgage rates increased by the most in a single week since 2011, and refinance application volume dropped to its lowest level in almost two years. However, applications for conventional purchase loans picked up by more than 3 percent over the week, and total purchase applications were 16 percent higher than one year ago, indicating that homebuyers are not yet dissuaded by the increase in mortgage rates. Government purchase applications dropped again, likely a function of the recent increase in FHA mortgage insurance premiums."

Both contract interest rates and effective rates rose across the board during the week for loans with an 80 percent loan to value ratio. Points quoted include the origination fee.

The average contract rate for 30-year fixed-rate mortgages (FRM) with conforming loan balances of $417,500 or less increased to 4.46 percent, the highest rate since August 2011, from 4.17 percent. Points decreased to 0.35 from 0.41. The jumbo version of the 30-year FRM (loan balances over $417,500) increased from 4.23 percent with 0.34 point to 4.52 percent with 0.28 point. This was the highest rate for the jumbo loan since March 2012. The rate for a 30-year FRM backed by FHA soared to its highest rate since August 2011, 4.20 percent with 0.40 point, compared to 3.85 percent with 0.22 point the previous week.

Fifteen-year FRM jumped to the highest rate since November 2011, jumping 25 basis points to 3.55 percent. Points increased to 0.43 from 0.39.

The average contract interest rate for 5/1 adjustable rate mortgages (ARMs) increased to 3.06 percent, the highest rate since October 2011, from 2.81 percent, with points increasing to 0.39 from 0.35. The ARM share of activity increased to 7 percent of total applications.

MBA's Weekly Mortgage Application survey, conducted since 1990, covers over 75 percent of all U.S. retail residential mortgage applications. Respondents include mortgage bankers, commercial banks and thrifts. Base period and value for all indexes is March 16, 1990=100.