Homebuyers dominated the mortgage market last week, but refinancers sat on the sidelines despite the lowest interest rates of the year.
Total mortgage application volume rose 1.5 percent on a seasonally adjusted basis for the week from the previous week. Volume was 21 percent lower than during the same week a year ago, according to the Mortgage Bankers Association.
Interest rates fell for the third straight week, but not enough to entice current homeowners to head back to the bank. Applications to refinance a home loan were unchanged for the week and were 40 percent lower than the same week one year ago, when rates were lower. The refinance share of total applications fell to 41.6 percent, the lowest since September 2008.
"Mortgage rates dropped over the course of last week as global tensions increased surrounding events in the Middle East and the Korean peninsula," said Mike Fratantoni, chief economist for the MBA.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) decreased to 4.28 percent from 4.34 percent, with points increasing to 0.38 from 0.31 (including the origination fee) for 80 percent loan-to-value ratio loans. Mortgage rates took a big leap following the presidential election, and while they have since moderated, they remain higher, leaving fewer borrowers to benefit from a refinance.
Mortgage applications to purchase a home fared better, rising 5 percent for the week, although they are just 3 percent higher than the same week a year ago. Purchase applications are less sensitive to weekly rate moves.
"The spring housing market is off to a solid start," said Fratantoni. "Despite the relatively weak job report for March, job growth is averaging almost 180,000 [a month] so far this year, providing a strong support for the home purchase market."
Mortgage rates moved even lower Tuesday, as global concerns weighed heavily on investors.
"Bond markets (which drive mortgage rates) benefited from investors seeking safe haven after headlines broke regarding North Korea's nuclear threats against South Korea and the U.S.," wrote Matthew Graham, chief operating office of Mortgage News Daily. "Other geopolitical considerations regarding Russia's potential involvement with Syrian gas attacks and the French election added to the bond market gains."
As investors buy more bonds, yields retreat. Mortgage rates loosely follow the yield on the 10-year Treasury.