Today’s homebuyers appear to be increasingly sensitive to weekly moves in mortgage rates. While home prices are easing some, affordability is still a major hurdle, especially as more first-time buyers enter the market.

Last week, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased to 6.43% from 6.30% the previous week, with points rising to 0.63 from 0.55 (including the origination fee) for loans with a 20% down payment.

As a result, mortgage applications to purchase a home dropped 10% from the week before, according to the Mortgage Bankers Association’s seasonally adjusted index. Buyer demand was 36% lower than the same week one year ago when the 30-year fixed-rate mortgage averaged 5.20%.

“Affordability challenges persist and there is limited for-sale inventory in many markets across the country, so buyers remain selective on when they act,” wrote Joel Kan, MBA’s deputy chief economist, in a release. “The 10-percent drop in FHA purchase applications, and the increase in the average purchase loan size to its highest level in a month, are other indications that first-time buyers have pulled back.”

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