Mortgage applications are falling right now as mortgage interest rates rise. While mortgage applications are still up year-over-year, the week-to-week average is dropping, reports MarketWatch:

Total application volume was still up an unadjusted 7.6% compared with the same week in 2008. The seasonally adjusted four-week moving average for all mortgages was down 8.7%.

Overall, mortgage filings as tracked by the MBA had dropped 16.2% on a seasonally adjusted basis in the week ended May 29 from a week earlier, also paced by lower refinancing activity.

Clearly, one of the reasons that mortgage applications have been on the rise has been the historically low mortgage interest rates. Lately, mortgage rates have been below 5%, and that has spurred a lot of buying as would-be homeowners look for deals. Now, though, mortgage interest rates are on the rise. In the past two weeks, mortgage interest rates have gone from 4.81% to 5.57% for a 30 year fixed home loan. It is clear that this dramatic rise in rates is slowing mortgage applications as fewer people refinance and buy.

This leads to the speculation that the Fed may try to interfere with more quantitative easing. While all interest rates are expected to go up by the end of the year, there is some interest in keeping mortgage interest rates a little bit lower — at least for a while longer. The housing market needs a little more time to get a toehold in recovery, and that means lower mortgage rates for some time yet.