Mortgage Refinancing Applications Drop as Interest Rates Rise
ByMortgage refinance loans continue to make up the majority of the market with both VA home mortgages and FHA home loans dominated. A according to industry data released today, mortgage loan applications dropped last week as mortgage rates crept up. The mortgage market composite index, a measure of mortgage loan application volume, fell 16.2% on a seasonally adjusted basis compared with a week earlier, according to the Mortgage Bankers Association. The drop was reflected mostly with the home refinancing activity. The home refinancing index fell 24.1% last week, while the home purchase index increased 4.3%.
According to the MBA the rate hike comes as the average thirty-year fixed-rate mortgage interest rate increased to 5.25% last week from 4.81%, That was the most significant mortgage rate increase since October 2008.
Mortgage interest rates have been slowing rising up as demand for long-term government bonds has eased in recent weeks, analysts have said. Bonds are a traditional safe haven during market turbulence, but stocks have been buoyed by optimism that the recession was easing. Also, investors have also begun to shy away from government debt on fears the government and FHA was taking on too much to fund federal recovery efforts. “If you were looking for mortgage refinancing for under 5%, this puts the brakes on that,” said Guy Cecala, publisher for Inside Mortgage Finance. Refinance mortgages have been in high demand as adjustable rate loans have been resetting in 2009 at an alarming rate.
Mortgage refinance rates are still low by historical standards and could fall again as the government continues to buy up mortgage-backed securities and government bonds, Cecala said. The housing market has remained weak this year, though a plummet in home sales prices has attracted buyers in some of the hardest-hit parts of the country. Although some mortgage insiders and esteemed economists believe sales could begin to show improvement later this year, prices are expected to continue to fall.
