The Mortgage Bankers Association (MBA) released its weekly report on mortgage applications Wednesday morning, noting a decrease of 4.1% in the group’s seasonally adjusted composite index. That followed a drop of 2% for the previous week. Mortgage loan rates did a U-turn last week and rates rose on all loan types.

The seasonally adjusted purchase index decreased by 6% from the prior week’s report. On an unadjusted basis, the composite index decreased by 2% week-over-week. The unadjusted purchase index also decreased by 2% for the week, and it is 17% lower year-over-year.

Adjustable rate mortgage loans account for 8% of all applications, unchanged from a week ago.

The MBA’s refinance index decreased by 3%, after declining by 0.2% in the previous week. The share of refinancings fell by a point to 61% of all applications.

The average mortgage loan rate for a conforming 30-year fixed-rate mortgage increased from 4.45% to 4.50%. The rate for a jumbo 30-year fixed-rate mortgage rose from 4.40% to 4.45%. The average interest rate for a 15-year fixed-rate mortgage rose from 3.49% to 3.55%.

The contract interest rate for a 5/1 adjustable rate mortgage loan fell from 3.11% to 3.20%.

The purchase index is at its lowest point since September 2011. Higher interest rates are slowing down refinancing, and the cold weather probably has had some impact as well. But there is something else at work as well.

Since home prices reached their low point in February of 2012, real home prices have risen by 17% and borrowing costs (interest plus lenders’ fees) are up 26%. As Fed tapering continues, interest rates should continue to rise, and that is very likely to have a negative impact on first-time home buyers. This has not happened yet, but watch inventory levels — if they begin to rise sharply, that will not be good for buyers or sellers in the housing market.

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