Mortgage rates improved a few basis points yesterday. Home loan applications have decreased across the country over the last few weeks. Home lenders were somewhat subdued in passing along mortgage rate improvements though. This is a function of a few reasons. First, mortgage-backed securities prices have held to a tight range over the course of the week. The second reason is a bit more obvious, the FOMC meeting ended today at 2:15pm. This was a major market event, so it makes sense that mortgage lenders would be defensive ahead of a scheduled event that had the potential to move interest rates in either direction. Before getting to the impact of the FOMC on mortgage rates, allow me to recap the day’s economic data releases. Both conventional and FHA mortgage rates ticked up slightly.
Early this morning, the Mortgage Bankers’ Association released their weekly applications index. The MBA survey covers over 50 % of all US residential mortgage loan applications taken by mortgage bankers, commercial banks, and thrifts. The data gives economists a look into consumer demand for mortgage loans. A rising trend of mortgage applications indicates an increase in home buying interest, a positive for the housing industry and economy as a whole. Furthermore, in a low mortgage rate environment, such a trend implies consumers are seeking out lower monthly payments which can result in increased disposable income and therefore more money to spend on discretionary items or to pay down other debt.
| The Fed keeps mortgage rates low! No Money Down Home Loans are available with VA. | Finance Home Rehabilitation! Check your eligibility for FHA 203K Loans. |
The report indicated a 3.3% decline in purchase application activity and a 15.1% decline in refinances. Of note, the MBA issued a rare comment: “Although rates remain low, there appears to be a smaller pool of borrowers who are willing and able to refinance at today’s rates.” I agree, mortgage rates in the low 5% range are still extremely aggressive when you look back at the history of mortgage rates, but I think a more accurate statement would have been “many borrowers want to refinance to take advantage of near record low mortgage rates, but the tightening of lender guidelines has made it too difficult for borrowers to qualify.” Maybe that’s what the MBA was really trying to say? What is your opinion?
For more on the MBA Applications Index and the potential impact on the Fed’s intentions to exit the MBS market, check out the other mortgage news stories. We also received another look into the strength of housing: the New Home Sales survey. This survey is primarily based on a sample of houses selected from building permits. Since a “sale” is defined as a deposit taken or sales agreement signed, this can occur prior to a permit being issued. Changes in sales price data reflect changes in the distribution of houses by region, size, etc., as well as changes in the prices of houses with identical characteristics. It takes four months to establish a trend of new home purchases.
