How is Cyprus affecting mortgage rates?by Tim Manni
Rates on the most popular types of mortgages barely moved, according to HSH.com’s Weekly Mortgage Rates Radar. The average rate for conforming 30-year fixed-rate mortgages rose by one basis point (0.01 percent) to 3.74 percent, a new 2013 high. Conforming 5/1 Hybrid ARM rates decreased by four basis points, closing the Wednesday-to-Tuesday wraparound weekly survey at average 2.68 percent.
“Fixed mortgage rates had just a little leftover momentum from last week’s more substantial rise,” said Keith Gumbinger, vice president of HSH.com. “However, markets became spooked this week over a bank-bailout plan in Cyprus that would have heavily taxed regular bank depositors to help defray the cost of European Central Bank (ECB) financial support to keep them afloat. As has been the case in times of fiscal trouble, money poured into U.S. Treasuries, driving the yields that influence mortgage rates lower over the past few days.”
Worries about market reaction to the plan caused Cyprus banks to close until Thursday. The plan has now been rejected and the Cypriot government will need to find a new plan to be able to obtain needed assistance from the ECB, likely meaning some tense times ahead.
“Our own Federal Reserve may note ongoing troubles in world financial markets as it concludes a meeting today,” added Gumbinger. “These bank insolvency issues are a problem for central bankers and ordinary citizens alike, but they do help lower rates for American mortgage borrowers, so at least there is some good that comes from them. Mortgage rates should be moving downward a little as we close the week.”
Mortgage applications continue to drop
The last five or six weeks haven’t been all that great for mortgage applications. According to the Mortgage Bankers Association, overall mortgage applications fell 7.1 from the week prior. Purchase and refinance applications were down 4 percent and 8 percent, respectively, for the week ending March 15.
The pool of refinance applications continues to shrink, making up 75 percent of all applications, down one percent from the week prior. According to the MBA, this marks the 10th straight week refinance applications have gone down. Refinance applications are at their lowest level since May 2012.
ARMs held steady at 5 percent, while the share of HARP refinances increased 1 percent during the week ending March 15, landing at 31 percent.