Mortgage Rates Rise So Do Mortgage Applications

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With the rise of mortgage rates comes a higher volume of mortgage applications, latest weekly surveys made separately by Freddie Mac and the Mortgage Bankers Association confirmed. On the mortgage rate side, the 30-year fixed mortgage rate increased for the first time this 2017. Meanwhile, mortgage applications are at their highest level since June.

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For the week ended January 26, 2017, the 30-year fixed mortgage rate recorded 4.19%, up from its 4.09% average of the previous week. About the same time last year, the 30-year FRM averaged 3.79%.

Meanwhile its shorter-term counterpart, the 15-year fixed-rate mortgage averaged 3.40% during the week surveyed. It showed an increase from the previous week’s 3.34% and from last year’s average rate of 3.07%.

The 5/1-year adjustable rate mortgage slightly dropped to 3.20% for the week ended January 26. Last week, the 5/1-year rate averaged 3.21% and a year ago it was 2.90% on an average.

Sean Becketti, who serves as chief economist at Freddie Mac, offered this explanation to the results of the current Primary Mortgage Market Survey® with the rise of the 15-year and 30-year fixed mortgage rates for the first time this year:

“The 10-year Treasury yield increased more than 10 basis points this week. The 30-year mortgage rate moved up as well to 4.19 percent, a 10 basis point jump. This week marks the first increase in the mortgage rate since December 29.”

Mr. Becketti continued, “The 2.8 percent decline in existing home sales in December is a reminder of the lack of homes for sale. According to the National Association of Realtors, supply is at its lowest level since 1999, a factor that should support higher house prices regardless of the oscillations of the mortgage rate.”

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For the week ended January 20, 2017, the volume of mortgage loan applications increased 4% on a seasonally adjusted basis compared to the previous week’s 0.8% increase. The survey results took into account the Martin Luther King holiday adjustments.

The market composite index, which measures the mortgage application volume, did decrease 5% on an unadjusted basis. The refinance index saw an increase of 0.2% compared to the previous week.

Meanwhile, the purchase index on a seasonally adjusted basis posted a six-percent increase from the previous week, marking its highest level since June 2016.

On an unadjusted basis, the purchase index increased 2% from the previous week and was up 0.1% from last year’s numbers.

Refinance’s share of the total mortgage activity dropped to 50%, the lowest it has been since July 2015 and from the previous surveyed week’s 53%. The share of adjustable-rate mortgage in the total loan applications remained at 5.7%.

For the relevant week surveyed, the mortgage loans taken out averaged $309,200, the highest since December 16.

Let’s take a look at how much the government loans took up in the total application volume during the surveyed period:

  • FHA loans: 13.6% vis-a-vis 13.1%
  • VA loans: 12.2% vis-a-vis 12.1%
  • USDA loans: unchanged at 0.9%

About the PMMS®, Freddie Mac said it is based on conventional mortgages with an LTV of 80%, covering 125 lender respondents. MBA’s Weekly Mortgage Applications Survey covers 75% of all U.S. residential mortgages, according to the MBA site.

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