Mortgage Rates Push Applications Down Again
Dec 7th, 2016 @ 1:14 PM by Amber Nelson
The MBA’s Market Composite Index declined 0.7 percent in the week ended Dec. 2. The Refinance Index fell 1 percent from the week before, a slower pace than the last few weeks but still enough to push the refinance index to its lowest level of 2016. Refinance applications have decreased 7 percent from the previous year.
Interestingly though, the share of refinance activity rose to 56.2 percent of all mortgage applications this week, up from 55.1 percent the previous week.
The Purchase Index, a measure of applications for home purchase mortgages, increased 0.4 percent during the same week and it is slightly higher now than it was a year ago.
“Refinances are almost entirely driven by mortgage rates, while purchase activity is a function of a broader set of variables including the state of the job market, demographics, and consumer confidence,” said MBA chief economist Michael Fratantoni.
Home buyers are not as swayed by jumps in interest rates, especially as rates are still near historical lows. However, the recent increases may actually be motivating some buyers to purchase sooner rather to lock in today’s rates before they rise any higher.
The average rate on a 30-year conforming loan rose to 4.27 percent with 0.37 points, the highest level in over two years, up from 4.23 percent with 0.41 points the week before.
“Over the last month, going back to the week prior to the election, mortgage rates on 30-year loans have increased 50 basis points, and refinance application volume has dropped by 28 percent. Over the same time period, purchase application volume is up almost 12 percent,” said Fratantoni.
Rates may continue to rise this week if the European Central Bank announces (as expected) plans to conclude its stimulus program. The Federal Reserve is also expected to raise its rate at its next meeting which could also push rates higher.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.