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December 19th, 2012

Mortgage rates wobble, applications decline

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int rate QMarkRates on the most popular types of mortgages moved in different directions this week, according to HSH.com’s Weekly Mortgage Rates Radar. The average rate for conforming 30-year fixed-rate mortgages rose by two basis points (0.02 percent) to 3.47 percent. Conforming 5/1 Hybrid ARM rates decreased by three basis points, closing the Wednesday-to-Tuesday wrap-around weekly survey at an average of 2.65 percent.

“We’re moving closer to not only the ‘fiscal cliff,’ but also to the end of the quarter and year, not to mention the holidays,” said Keith Gumbinger, vice president of HSH.com. “Investors seem undecided as to whether a deal will get done, and seem unclear where to park their funds to make the best of the situation one way or the other.”

At the end of each quarter and calendar year, investors often try to square away positions to lock in any gains they have made. Because of market closures, the holidays can make this more of a challenge, and the fiscal mess is adding to the confusion of which way the economy will go. Should we fall off the ‘cliff,’ the economy is widely expected to head toward another recession. Although bad for the economy, “that’s good for bonds and mortgage rates,” noted Gumbinger. On the other hand, “a deal getting done should help us skirt recession, and that’s better for stocks.”

However, with the Fed moving more deeply into the mortgage and Treasury markets, low and fairly stable interest rates should continue to be available, though they can still fluctuate from day to day and week to week.

What a difference a week makes

Last week at this time, the Mortgage Bankers Association reported that mortgage applications were at their highest point since Oct. 12 for the week ending Dec. 7. This week, the MBA reports that mortgage applications have fallen to their lowest point since the week ending Nov. 2.

The MBA reported Wednesday that mortgage applications were down 12.3 percent from the week prior. Refinance applications were down 14 percent from the previous week and the purchase index was down 5 percent.

“Despite the Federal Reserve’s announcement last week that it would purchase an additional $45 billion in Treasury securities per month as part of its continuing quantitative easing effort, rates increased in the second half of the week,” said Mike Fratantoni, MBA’s vice president of research and economics, in a release. “As a result, refinance applications dropped sharply to the lowest level in over a month.”

The refinance portion of applications dropped one percent to an 83-percent share of overall applications.

Given the holiday season, I wouldn’t be surprised if we saw refinances continue to decline in the weeks ahead.

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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