U.S. Mortgage Applications Tumble As 30-Year Rates Spike Toward 4%

(RTTNews) - U.S. mortgage applications tumbled last week as interest rates jumped, according to the latest figures from the Mortgage Bankers Association.

Loan applications fell 13.2 percent for the week that ended Friday.

Refinancing dropped 14 percent, and in a sign that potential home buyers are extremely sensitive to interest rates, home purchase applications were down 7 percent.

A move by the Federal Housing Administration to help cash strapped borrowers failed to boost new applications.

That's because the average contract interest rate for 30-year fixed-rate mortgages increased to 3.93 percent from 3.84 percent.

"FHA volume continued to be stronger than the market as a whole, but also showed a decline. FHA purchase volume was down 5 percent for the week, and FHA refinance volume was down by 8 percent. By comparison, conventional purchase and refinance volumes were down 7 and 17 percent, respectively," Mike Fratantoni, the MBA's chief economist said.

Meanwhile, "Refinance volume fell particularly for larger loans, as evidenced by the decline of almost $25,000 in the average loan size for a refinance loan," said Fratantoni.