According to the Mortgage Bankers Association (MBA), the number of mortgage applications in the U.S. declined for the first time in four weeks. The MBA’s index of applications fell by 11 percent for the week ended January 22, from 575.9 to 513. 

Despite the low interest rates, refinancing activity dropped with the index of refinancing applications falling by 15.1 percent. The share of applicants seeking to refinance a loan dropped to 67.6 percent last week, the lowest in three months, from 71.7 percent a week earlier. The decline in refinancing usually lowers consumer spending as borrowers are not using the surplus cash they would have otherwise saved through refinancing. 

The MBA’s survey also found that the average rate on a 30-year fixed loan rose from 5 percent to 5.02 percent last week while the average rate on a 15-year fixed mortgage increased from 4.33 percent to 4.34 percent. The rates on a one-year adjustable mortgage increased to 6.84 percent. 

The decline in mortgage applications follows close on the heels of a recent report by the National Association of Realtors which found that existing home sales fell by 16.7 percent in December, the largest monthly decline in over 40 years. This sharp decline from an unchanged pace of 6.54 million in November to a seasonally adjusted annual rate of 5.45 million, beat analysts’ expectations of a 10 to12 percent decrease by a huge margin. 

With interest rates expected to rise once the Federal Reserve stops purchasing mortgage-backed securities in March, we can expect to see refinancing drop further.