Mortgage Apps: Purchases Start Drop As Refis Continue Plunge

Bottom Line:  Mortgage rates pushed over 5% on the average 30-year fixed (adjusted for points paid), refis continued to decline sharply, and purchase applications dropped after holding up in prior weeks. Current coupon yields in the secondary market were modestly higher last week, hitting new cycle highs, but spreads to Treasuries held below their recent highs. MBS investors are still trying to assess extension risk, and spreads could still widen -- but for now, spreads are holding steady. Applications for refinancing continued to tumble last week, mostly with their historical correlation to mortgage rates. Purchase applications, meanwhile, had been holding up better than they had historically. But last week saw a decline that might mark the beginning of a new trend lower if mortgage rates hold over 5%.The MBA Mortgage Application Index FELL -6.3% to 398.0, BELOW the 13-week average of 512.0 and -42.5% BELOW the year-ago level. Non-seasonally adjusted the index FELL -5.7%.The Purchase Index FELL -3.4% to 258.0, BELOW the 13-week average of 276.0 and -9.0% BELOW the year-ago level.The Refinancing Index FELL sharply, DOWN -9.9% to 1166.0, BELOW the 13-week average of 1854.0 and -62.0% BELOW the year-ago level.The effective (adjusted for points paid) 30-year mortgage rate ROSE 10bps to 5.06%, ABOVE the 13-week average of 4.24% and 45bps ABOVE the year-ago level.