Interest rates rose to the highest levels since December during the week ended March 16 and, driven largely by refinancing, mortgage applications activity fell significantly.   The Mortgage Bankers Association (MBA) reported that its Market Composite Index, a measure of mortgage application volume, decreased 7.4 percent from the previous week on a seasonally adjusted basis and 7.1 percent unadjusted.  

The Refinance Index decreased 9.3 percent from the previous week and the refinancing share of mortgage activity decreased to 73.4 percent of total applications from a 75.1 percent share during the week ended March 9.  This is the lowest share of applications for refinancing since July 2011, however as noted below, the new version of the Home Affordable Refinancing Program (HARP) had a significant impact on refinancing in a number of states.  The seasonally adjusted Purchase Index decreased 1.0 percent from one week earlier and the unadjusted Purchase Index was down 0.6 percent from the previous week and was 1.9 percent lower than the same week one year ago.

Jay Brinkmann, MBA's Senior Vice President of Research and Education said, "With the rate increase last week, refinances are obviously slowing, and the refinance share at 73% is down to its lowest level since last July.  With rate/term refinances falling as we go forward, HARP will be a bigger percentage of refinances but will be more concentrated in certain states.   Brinkmann noted that, "Some of the largest institutions are reporting that the HARP share of their refinances remained at about 30% last week, but HARP volume is not equal across the country. The states that I started referring to years ago as the sand states that had the worst delinquencies we now should start calling the HARP states for mortgage refinances.  We saw big state-level differences in refinance applications for February over January: Florida was up 49%, Arizona was up 61%, and Nevada was up 71%.  Refinances in the rest of the country were generally flat or even down.  For example, Texas had no change, Colorado was down 3%, Connecticut was up only 2%, and Virginia was up 1%.  HARP clearly is a driving force in those states that saw the most defaults and the biggest drops in home equity."

The four-week moving average for the seasonally adjusted Purchase Index rose 3.25 percent while the seasonally adjusted Market Index lost 2.79 percent and the Refinance Index was down 4.31 percent.

The increase in interest rates and effective rates affected all loan products tracked by the MBA. The average rate for 30-year fixed-rate mortgages (FRM) with conforming loan balances ($417,500 or less) increased to 4.19 percent from 4.06 percent, with points increasing to 0.47 from 0.43.  The average rate for jumbo FRM (with balances greater than $417,500) increased to 4.49 percent with 0.38 point from 4.39 percent with 0.39 point. 

The rate for 30-year FRM backed by the FHA increased to 3.93 percent from 3.82 percent, with points decreasing to 0.48 from 0.55. Rates for 15-year FRM jumped 11 basis points to 3.47 percent and points increase to 0.40 from 0.34. 

The 5/1 adjustable-rate mortgage (ARM) had an average rate of 2.90 percent with 0.44 point compared to 2.81 percent with 0.37 point the previous week. The ARM share of activity decreased to 5.6 percent from 5.8 percent of total applications from the previous week.

All rates quoted are for loans with an 80 percent loan-to-value ratio and points include the origination fee.

The average loan size of all loans for home purchase in the US rose to $225,463 in February from $216,888 in January. The average loan size for a refinance was $222,048, down from $227,563 in January.  The largest loan for both purchase and refinancing were made in the Pacific region at $324,606 and $305,949 respectively. 

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