Rising Mortgage Rates Cool Loan Demand
Mortgage rates climbed to the highest level in a month, which caused mortgage applications to decrease this week, the Mortgage Bankers Association reports.
Total mortgage application volume, which includes refinancings and home purchases, dropped slightly by 0.8 percent week-to-week on a seasonally adjusted basis. However, volume remains 10 percent higher than a year ago, mostly due to stronger demand for home purchases.
Refinance applications last week dropped 1 percent but remain 4 percent higher than a year ago on a seasonally adjusted basis, MBA reports. Applications for home purchases — viewed as a gauge of future buying activity — dropped 1 percent but are 20 percent higher than year-ago levels.
MBA also reports the average on 30-year fixed-rate mortgages rose to 4.01 percent from 3.98 percent the prior week. Rates are now reportedly moving higher at a faster pace following the Federal Reserve’s announcement last week that it could raise rates in December.
“The troubling consideration is that the recent lows now run the risk of being cemented as a longer-term floor,” notes Matthew Graham, chief operating officer of Mortgage News Daily. “With expectations for a December rate hike from the Fed, longer-term rates [such as mortgages] will have a hard time committing to any significant move lower unless something happens that is clearly seen as staying the Fed’s hiking hand.”
Source: “Higher Interest Rates Push Mortgage Applications Down 0.8%,” CNBC (Nov. 4, 2015)