The
Columbus Day holiday appears to have messed around with the mortgage numbers,
but a week later the numbers are now clearer, and so is the message. Higher
interest rates are hitting homeowners hoping to refinance and homebuyers hoping
to get in on the fall housing market.
Total
mortgage application volume rose 4.9 percent last week from the previous week,
according to the Mortgage Bankers Association's seasonally adjusted index. This
followed a large drop the week before, when the mortgage numbers were not
adjusted for the Columbus Day holiday. Taking that out now, mortgage volume is
lower than it was two weeks ago for refinances and purchases. Volume was also
16 percent lower than the same week one year ago.
Mortgage
applications to refinance jumped 10 percent for the week but were 32 percent
lower than a year ago, when mortgage interest rates were a full percentage
point lower. Fewer and fewer borrowers are now able to benefit from a refinance
because so many already locked in lower rates a few years ago. Those wishing to
take cash out of their homes now are more likely to do a second home equity
loan, rather than lose their low interest rate.
The
average contract interest rate for 30-year fixed-rate mortgages with conforming
loan balances ($453,100 or less) increased last week to its highest level since
February 2011, 5.11 percent from 5.10 percent, with points decreasing to 0.52
from 0.55 (including the origination fee) for loans with 20 percent down
payments.
Mortgage
applications to purchase a home rose 2 percent for the week but were
essentially flat compared to a year ago. Demand is strong, but affordability
has weakened considerably. Home sales have been falling steadily all summer,
even as more supply comes onto the market. Prices in the first half of the year
were driven higher by a very short supply of homes for sale. The monthly
payment on the average home is now 15 percent higher than it was a year ago,
according to Zillow, due to higher home prices and rising rates.
"The
holiday impacted refinance applications more than purchases," said the
MBA's Joel Kan. "Meanwhile, purchase applications increased 2 percent over
the prior week but were still 4 percent lower than two weeks ago — a sign that
both the jump in mortgage rates and tight inventory continue to hold back application
activity."
Mortgage
rates were tested this week, as the stock market saw huge volatility, dropping
over 400 points early Tuesday and then rebounding. While the yield on the
10-year Treasury, which mortgage rates loosely follow, did fall slightly, it
was not enough for most lenders to reprice their rates.