US mortgage rates spiked last week, slashing refinancing demand, while requests for home purchase loans held steady amid a final rush for federal tax credits, Mortgage Bankers Association data showed on Wednesday. Time is running out for home buyers seeking tax credits of up to $8,000, with purchase contracts needing to be signed by the end of this month and loans closed by the end of June.
With just a month to cash in on the tax incentive, which is designed to infuse life into a fragile housing market, demand for mortgages to buy homes eked out a 0.2 percent seasonally adjusted rise in the week ended April 2, the trade group said. But applications for refinancing slumped 16.9 percent, pushing the trade group's mortgage market index of total applications down 11 percent.
The average 30-year mortgage rate shot up by more than a quarter percentage point to 5.31 percent, a nearly eight-month high and well above the 4.61 percent record low a year ago. Refinancing represented 58.7 percent of all applications last week, down from 63.2 percent the prior week. It was the lowest share since last August.
"Mortgage rates jumped last week as the Federal Reserve completed their purchases of mortgage-backed securities," Michael Fratantoni, MBA's vice president of research and economics, said in a statement. US home loan rates have likely seen their cyclical lows and are headed up now that the Federal Reserve has ended purchases of more than $1.4 trillion in mortgage-related debt aimed at lowering borrowing costs to revive housing.
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