Applications take a hit as some affordability tumbles
For the past few weeks, continual declines in mortgage rates have brought more consumers into the fold when it comes to seeking a home loan, mainly for refinances. However, when rates stop sliding, it seems consumer interest in this kind of financing drops, and that was reflected in the number of applications filed last week.
In all, home loan requests fell 6.6 percent on a seasonally adjusted basis during the week ending Oct. 24, according to the latest Weekly Mortgage Applications Survey from the Mortgage Bankers Association. That was driven in nearly equal parts by declines in refinances, which were down 7 percent from the previous week, and purchases, which slipped 5 percent. Purchase requests also slipped about 15 percent on an annual, unadjusted basis, and now sit at the lowest level seen since February.
But because the drops were so closely aligned, the share of the mortgage market taken up by refinances specifically was unchanged at 65 percent, the report said. Meanwhile, the portion taken up by adjustable-rate mortgages fell somewhat to 8.2 percent overall.
Rates a mixed bag
It's tough to attribute these recent drops in consumer interest to anything in particular, the report said. While rates for 30-year fixed home loans, which are used mostly to facilitate purchases, ticked up very slightly to 4.13 percent from the previous 4.1 percent, those for 15-year FRMs and five- and one-year ARMs remained unchanged at 3.28 percent and 2.94 percent, respectively.
"Borrowers with jumbo loans tend to be most sensitive to changes in rates, and that sensitivity has been clearly apparent in the past few weeks with double and even triple digit percentage changes in refinance application volume for jumbo loans," said Mike Fratantoni, chief economist for the MBA. "The average loan size for refinance applications decreased to $263,600 in the most recent week from a survey high of $306,400 the previous week. The decrease was driven by a 41 percent drop in refinance applications for loans greater than $729,000, which had surged almost 130 percent the week before."
Mortgage brokers and lenders that are trying to boost business as rates moderate might want to remind consumers that what they're paying these days is likely to be very favorable in comparison with those available even a few months from now. Today, many experts believe that rates will be in the 5 percent range as soon as the middle of next year.
By: Equity National October 30, 2014 Closing