Buyers Growing Wary From Rate Rises?
Total mortgage applications, including both refinancing and home-purchase loans, dipped 1.5 percent last week from the week prior on a seasonally adjusted basis as mortgage rates continued to tick up, the Mortgage Bankers Association reports in its weekly mortgage market survey.
Applications for home purchases, viewed as a gauge of future homebuying activity, dropped 4 percent from the previous week to its lowest level since April. Yet, home purchase applications are still 11 percent higher than the same week one year ago.
"The drop this week may indicate borrowers being wary of the recent runup in mortgage rates," said Mike Fratantoni, MBA's chief economist.
MBA reports that the 30-year fixed-rate mortgage averaged 4.04 percent last week, its highest level since December 2014 and up from 4 percent the week prior.
"We're likely to continue to see these mortgage rate swings as market participants try to anticipate Fed timing around rising short-term interest rates," says Len Kiefer, deputy chief economist at Freddie Mac. "Unfortunately, prospective home buyers may experience bouts of affordability shock in many housing markets. So far, it's been low mortgage rates that have helped to keep home-buyer affordability strong in the face of rising house prices, while income growth remains stagnant."
Mortgage applications for refinancings have been gradually falling over the past few weeks as rates have risen. Last week, applications for home refinances stayed basically flat, up just 0.3 percent for the week.
Source: “Weekly Mortgage Applications Drop 1.5% as Rates Rise,” CNBC (May 20, 2015)