The entire mortgage application volume has recorded an increased valued at 1.6 percent last week in comparison with the penultimate week. The increased interest rates may be the factor behind the return of the borrowers to their brokers. The average contract interest rate for 30-year fixed-rate mortgages with corresponding loan balances increased to its highest level for the first time in more than seven years.
It seems the interest rates for home loans are rising again, that could be the major reason why most of the borrowers are coming back to their brokers, as they believed that rates could move at a higher pace in the next few months. Based on the information released by the Mortgage Bankers Association’s report, the entire mortgage application volume experienced a 1.6 percent increase last week in comparison with the results obtained in the week before.
It was noticed that refinance volume was at the forefront with a four percent increase for the week, despite that it was 39 percent lower in comparison with the results in the same week last year. In the previous year last week, the rates were close to a full percentage point lower.
On the other hand, the refinance mortgage activity share also improved to 39 percent of the entire applications from 37.8 percent recorded in the previous week. However, borrowers who thought the rates could move at a slower pace may be responding to a new swell in rates, as they feel they would catch the flow now as it is still an excellent move.
Interestingly, the average contract interest rate for 30-year fixed-rate mortgages with corresponding loan balances of $453,100 or lower increased to its maximum level for the first time in more than seven years at 4.88 percent, an increase from initial 4.84 percent, as its points reducing to 0.44 from 0.46 which includes the origination fees for loans with a down payment of 20 percent.
According to Joel Kan, an MBA economist, he said the markets got several pieces of information which exhibits economic robustness like jobless claims, inflation, and wage growth, while the treasury rates were on the high side over the week.
The mortgage applications to buy a home were fundamentally dull for the week, moving at an increased level of 0.3 percent. However, the rates were four percent greater than the same week in the last year. During the summer, the purchase applications were on the low side but have improved on a yearly basis in the last five weeks.
The improved rates will aggravate the already dwindling affordability. Home prices will continuously improve and experience smaller growths in the last few years. Notably, more buyers are avoiding expensive markets such as California, an area where homes are placed on the market for an extended period, and their prices are slashed.
According to Mike Loewengart, the vice-president of investment strategy at E-Trade, he suggested that mortgage rates are likely to increase and crush the market in the face of extra rate hikes on the horizon. Presently, there are various positive signs in the economy, with the housing sector being the striking exception, and this could be a sign that the historic expansion period which we have been enjoying in the last ten years could be coming to an end.
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