The chief economist at Quicken Loans is not concerned over the decline in mortgage application activity even though interest rates increased by 13 basis points or more across all loan types compared with
“Mortgage applications fell last week as a result of homeowners being shocked by the bump in interest rates. I don’t foresee that this downward trend in applications will continue as homeowners get off the sidelines and take advantage of rates that are still relatively near record lows,” said Bob Walters.
For the week ended May 31, overall application volume fell 11.5% from the prior week on a seasonally adjusted basis, the Mortgage Bankers Association said. The unadjusted Refinance Index decreased 15% and is at its lowest level since the end of November 2011. The share of refinancings is at 68%, a decline of three percentage points and the lowest it has been since July 2011.
The seasonally adjusted Purchase Index fell 2% from one week earlier, but on an unadjusted basis, it was 13% higher than the same week one year ago.
HSH.com’s weekly mortgage radar found rates for the 30-year fixed-rate mortgage increased 19 basis points during the week ended Tuesday, to 3.99%.
Keith Gumbinger, vice president of HSH.com, commented, "Bond and mortgage markets continue to prepare themselves for an early exit by the Fed. Before the Fed begins to pull back, we will need to see a lot more solid economic data, especially in labor markets.
“The news of late suggests that the economy is holding its own, but little more, and that's with QE still fully in play. It could very well be that investors are getting ahead of themselves, given the lack of compelling evidence that the economy is ready to run without these supports.”
According to the MBA application survey, the average contract rate for the 30-year conforming FRM (MBA defines this as a loan with a balance of $417,500 or under) for the survey period is 4.07%, an increase of 17 basis points and the highest it has been since April 2012. Federal Housing Administration-insured loans had an average contract rate for the week of 3.76%, up 14 basis points from the previous week.
Jumbo 30-year FRMs saw the average contract rate rise 13 basis points to 4.20%. The MBA said the rate for the 15-year FRM increased by 13 basis points to 3.23%.
The share of adjustable rate mortgages was 6% of the week’s loan applications, and the average contract rate for the 5/1 ARM remained was up 16 basis points to 2.76%.
