Mortgage applications plunged last week, rates hit 4 month high

The Mortgage Bankers Association said applications for home loans across the nation fell 8.1 percent last week compared to the previous one and the average interest rate jumped to 3.67 percent, the highest rate since September 2012.

Real estate remains a big question mark heading into 2013 and signs of a slow down could further damage an eco0nomy that is into firing on all cylinders. On Wednesday, the Commerce Department reported the U.S. economy shrunk in the fourth quarter, impacted by a slowdown in defense spending. With so many people employed in Connecticut and the nation in this sector, instability here could dramatically affect multiple parts of the economy.

But this the MBA report is for one week and overall activity in the market was still higher than a year ago.

Refinancing activity fell the most, dropping 10 percent during the period. Refinancing accounted for just 79 percent of the total national market, the association said.

The interest rate on jumbo loans, those with an outstanding balances of 475,000 nationally, moved up as well, hovering at 3.95 percent compared to 3.85 percent the prior week. Jumbos loan interest rates were closing the gap on conforming loans for several months, but the spread now stands at 0.28 percent.

Rob Varnon