An 11 basis point rise in rates for the 30-year conforming fixed-rate loan has resulted in a 9.8% decrease in mortgage application volume on a seasonally adjusted basis for the week ended May 17, according to the Mortgage Bankers Association.
The unadjusted Refinance Index was down 12% compared to the prior week, while the seasonally adjusted Purchase Index was down 3%. Compared to the same week last year, the unadjusted Purchase Index was up 10%, which seems to be only good news in the survey.
Mortgage rates increased to their highest level since March last week, leading to the largest single week drop in refinance applications this year, said Mike Fratantoni, MBAs vice president of research and economics. The refinance index has fallen almost 19% over the past two weeks and is back to its lowest level since late March.
And a pair of industry observers who are looking at rate activity in real time note that things are still moving upward and thus likely to continue to impact application activity.
“After reaching lows for the year just four weeks ago, and despite plenty of mixed economic signals, 30-year fixed mortgage rates have quickly moved back to near this years highs,” said Keith Gumbinger, vice president of HSH.com. “Rising stock markets, with their promise of better returns, continue to draw investor money out of safe-haven investments such as bonds. Yields are increasing as a result, pulling mortgage rates along with them.”
Gumbinger adds, “Even with upward and downward moves this year, mortgage rates remain near record lows, and that can be expected to continue until we get reliably solid growth, inflation begins to appear or the Fed begins tapering its support. None of those conditions seems imminent.”
HSNs data show a seven basis point rise in the 30-year FRM rate to 3.6 8% for the period May 15 through Tuesday.
Zillows Mortgage Rate Ticker for yesterday afternoon showed a 10 basis point rise for the 30-year FRM over the previous week
This past week, mortgage rates jumped to highs not seen since March on the back of strong domestic economic data, said Erin Lantz, director of Zillow Mortgage Marketplace. Looking ahead, we expect rates will remain fairly flat as markets wait for upcoming Fed meeting minutes to verify whether the QE3 stimulus program will be scaled back earlier than expected.
Jim Svinth, loanDepot.coms chief economist, commented, “Todays report on existing-home sales shows that while consumers are in the market to buy a home, there simply is a lack of inventory. That discrepancy was also represented in the mortgage applications survey and the decrease in purchase applications. New home construction and increasing home values are essential to creating more inventory and meeting the needs of those in the market to buy a home. Recent trends signal these are on the uptick and that is a positive indicator for buyers.”
The MBA said the share of refi applications fell two percentage points to 74%. Home Affordable Refinance Program loans made up 32% of these, up two percentage points from the previous week.
The average contract rate for the 30-year conforming FRM (MBA defines this as a loan with a balance of $417,500 or under) for the survey period is 3.78%, an increase of 19 basis points over a two-week span. Federal Housing Administration-insured loans had an average contract rate for the week of 3.53%, up 10 basis points from the previous week.
Jumbo 30-year FRMs saw the average contract rate rise six basis points to 3.93%. MBA said the rate for the 15-year FRM increased by eight basis points to 2.96%. Two weeks ago it was at 2.81%, the lowest in the history of the survey.
The share of adjustable-rate mortgages increased to 5% of the weeks loan applications, even as the average contract rate for the 5/1 ARM increased by five basis points to 2.6%.
Article source: http://www.nationalmortgagenews.com/dailybriefing/Spiking-Rates-Dampen-Application-Activity-1036502-1.html