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A definitive rise in mortgage interest rates over the last month is keeping borrowers at bay. Loan application volume fell 3.2 percent last week from the previous week on a seasonally adjusted basis, according to the Mortgage Bankers Association. Volume is now skewing toward larger loans for more expensive homes.

Refinance applications, which are most rate-sensitive, decreased 5 percent from the previous week, seasonally adjusted to the lowest level since early September. They are still 4 percent higher compared with one year ago, when interest rates were slightly higher. The refinance share of mortgage activity now stands at 58.7 percent of total applications.

"The 30-year fixed rate has increased almost 20 basis points since a recent low, and the refinance index has decreased in four of the last five weeks," said Michael Fratantoni, the association's chief economist.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.14 percent from 4.18 percent, with points increasing to 0.49 from 0.45 (including the origination fee) for 80 percent loan-to-value ratio loans.
 Applications to purchase a home fell 1 percent from the previous week but are still 24 percent higher than the same week one year ago.

"Average purchase loan size climbed to a new survey high last week, as the higher end of the market continues to grow more quickly than the entry level," Fratantoni said.

Higher home prices are preventing some entry-level buyers from making a strong showing in the fall market. Tight supply of homes for sale pushed the S&P/Case Shiller national home price index up by 4.9 percent in September compared with a year ago. That is a wider annual gain than was measured in August.
The Federal Reserve is showing strong signs that it will raise long-term interest rates at its next meeting in December. That has some homebuyers rushing to get in while rates are still low, but they may not have to.