Mortgage rates increase to multi-year highsby Tim Manni
Rates on the most popular types of mortgages rose significantly, according to HSH.com’s Weekly Mortgage Rates Radar. The average rate for conforming 30-year fixed-rate mortgages leapt by 34 basis points (0.34 percent) to 4.40 percent. Conforming 5/1 Hybrid ARM rates increased by 37 basis points, closing the Wednesday-to-Tuesday wraparound weekly survey at an average of 3.23 percent.
It’s as though QE3 never existed
“The aftermath of the Fed meeting and Mr. Bernanke’s remarks at the concluding press conference about the future of QE continue to roil markets,” says Keith Gumbinger, vice president of HSH.com. “Even though the chairman spoke about tapering QE over what will likely be an extended period of time–through mid-2014 at least–bond market participants headed for the exits. The sell-off in Treasuries and mortgages has left us with rates at nearly two-year highs… it’s as though QE3 never existed at all.”
Will rates move even higher?
The questions on everyone’s mind: Will mortgage rates move even higher, and how much might the spike in rates damage the housing recovery?
“It’s not only the Fed chairman’s words pushing rates higher, but also pretty solid economic data and a rosier outlook for the future,” adds Gumbinger. “The market is on the defensive right now, and sensitive to good news, since the stronger the economy, the faster the Fed is likely to act. As record low mortgage rates powered both the recovery in housing and the broader economy, it stands to reason that a slowdown in home sales is likely, should rates remain near these levels for long.”
Mortgage refinancing has also had an important impact on the economy, putting consumers on better financial footing and freeing up money for new spending. Excepting a relative handful of borrowers, “that portion of the market is closed,” notes Gumbinger.
Mortgage applications continue to decline
Mortgage applications decreased once again last week as mortgage rates continue to climb. In recent weeks, we’ve seen some of the most aggressive increases in mortgage rates than we’ve seen in years. Mortgage applicants are certainly reacting to the higher rates.
Mortgage applications were down 3 percent across the board for the week ending June 21, according to the Mortgage Bankers Association. Applications now sit at their lowest level since November 2011.
The refinance share of mortgage applications was down 5 percent from the week prior, also at its lowest point since November 2011. Refinances now occupy only 67 percent of total applications, the lowest share since July 2011. The HARP share of all refinances dropped one percentage point for the week, sitting at 30 percent.
‘Homebuyers are not yet dissuaded’
Purchase applications actually increased by 2 percent for the week. Adjustable-rate-mortgage applications followed purchase apps higher, increasing to a 7 percent share of all applications for the week.
“Mortgage rates increased by the most in a single week since 2011, and refinance application volume dropped to its lowest level in almost two years,” Mike Fratantoni, MBA’s vice president of research and economics, said in a release. “However, applications for conventional purchase loans picked up by more than 3 percent over the week, and total purchase applications were 16 percent higher than one year ago, indicating that homebuyers are not yet dissuaded by the increase in mortgage rates.”