Mortgage Apps: Rates Blow Through 7%

Bottom Line:  The average 30-year fixed-rate in the primary mortgage market blew through 7%, hitting 7.15% last week as secondary mortgage market spreads to Treasuries widened sharply. As we said in recent weeks, holding below the psychologically important 7% rate was important for the mortgage market to continue to find a bottom in total applications. At this point, unless rates drop sharply, applications appear likely to head for new cycle lows. That will slow activity in the housing market, preventing it from finding a new equilibrium, as it was trying to do when rates were less volatile around 6.5%. Expect home prices to remain sticky, with most of the impact of higher interest rates coming in the form of less supply rather than sharply lower demand. But overall activity will invariably decline if rates hold these levels for more than a few weeks.The MBA Mortgage Application Index FELL -3.7% to 197.0, BELOW the 13-week average of 215.0 and -36.0% BELOW the year-ago level. Non-seasonally adjusted the index FELL -4.7%. The Purchase Index FELL -2.5% to 154.0, BELOW the 13-week average of 166.0, and -31.1% BELOW the year-ago level. The Refinancing Index FELL -6.9% to 412.0, BELOW the 13-week average of 464.0 and -45.1% BELOW the year-ago level. The effective (adjusted for points paid) 30-year mortgage rate ROSE sharply, UP 27bps to 7.15%, ABOVE the 13-week average of 6.75% and 30bps ABOVE the year-ago level. Current coupon yields in the secondary market were up 27.0 bps last week, closing at 5.47%.