Application Volume Rises Even Though Rates Also Rise

Overall application volume increased by 5% from the prior week on a seasonally adjusted basis for the week ended June 7, the Mortgage Bankers Association said. This took place even as interest rates are continuing to increase.

The unadjusted Refinance Index was up 5% while the seasonally adjusted Purchase index also increased 5%.

A week ago, the chief economist at Quicken Loans said he was not concerned over the decline in mortgage application activity and at least for one week, Bob Walters was correct in his view that homeowners and buyers would continue to take advantage of relatively low rates.

Still refi application volume is 36% lower than it was at the start of May, MBA said. The share of refi apps rose to 69% from 68%; the portion of refi apps for the Home Affordable Refinance Program fell to 29% from 32%.

The unadjusted Purchase index is 6% higher than the same week one year ago.

A pair of “real-time” rate trackers shows that interest rates continued to rise in the past week. HSH.com’s weekly mortgage radar found rates for the 30-year fixed rate mortgage increased nine basis points during the week ended Tuesday, to 4.08%.

Keith Gumbinger, vice president of HSH.com, commented that the rising rates should not be affecting purchase activity.

"With a $200,000 loan amount, the difference in monthly payment from recent fixed-rate lows to today's average amounts to about $66 more each month," noted Gumbinger. "That may be enough to quash a refinance, but shouldn't be a major setback for a home purchase transaction."

The 30-year fixed mortgage rate on Zillow Mortgage Marketplace is 3.93% as of Tuesday afternoon, up six basis points from 3.87% at this time last week.

"Despite a U.S. jobs report that was in line with expectations, mortgage rates rose yet again last Friday and are now at 15-month highs," said Erin Lantz, director of Zillow Mortgage Marketplace. "This coming week, without any significant negative economic news, we expect the mortgage rate rally to continue."

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 4.17%, an increase of eight basis points and the highest it has been since March 2012. Federal Housing Administration-insured loans had an average contract rate for the week of 3.81%, up five basis points from the previous week.

Jumbo 30-year FRMs saw the average contract rate rise five basis points to 4.25%. MBA said the rate for the 15-year FRM increased by nine basis points to 3.32%.

The share of adjustable rate mortgages was 7% of the week’s loan applications, and the average contract rate for the 5/1 ARM remained was up two basis points to 2.78%.