Rate-Sensitive Buyers Backing Off

Mortgage interest rates ticked up slightly the week ending January 25, sending mortgage application volume down 3 percent, according to new weekly index data from the Mortgage Bankers Association.

Annually, volume was down 16.5 percent. For 30-year fixed-rate mortgages, the average interest rate grew from 4.75 percent to 4.76 percent week-over-week, and 0.35 percent annually. Refinancing volume, the most rate-sensitive metric in the index, had the biggest drop, down 6 percent over the previous week and down 27 percent year-over-year. Joel Kan, MBA's VP of industry surveys and forecasts, tells CNBC, "Refinance activity had seen a small resurgence in the past few weeks, but there still remains only a small share of borrowers left to gain from rates at the current levels."

Mortgage rates have been in a very narrow range for the past few weeks but could break out this week, especially with two big events: Wednesday's Federal Reserve announcement on interest rates and Friday's monthly employment report.

"To be clear, the Fed will not be making any changes to the Fed Funds Rate tomorrow, but they may take bigger steps to telegraph future policy changes than they have at previous announcements," Matthew Graham, chief operating officer at Mortgage News Daily, said Tuesday. "Investors will be looking for clues in the verbiage."

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