Mortgage rates have settled somewhat, refinances crashby Tim Manni
Rates on the most popular types of mortgages increased slightly, according to HSH.com’s Weekly Mortgage Rates Radar. The average rate for conforming 30-year fixed-rate mortgages rose by five basis points (0.05 percent) to 4.45 percent. Conforming 5/1 Hybrid ARM rates increased by seven basis points, closing the Wednesday-to-Tuesday wraparound weekly survey at an average of 3.30 percent.
Mortgage rates have settled
“The big jump in mortgage rates late last week has settled somewhat,” said Keith Gumbinger, vice president of HSH.com. “From the data we gather each day, indications are that rates have started to slide backward a little bit, relative to what we observed last week.”
Mortgage rates rose to nearly two-year highs last week, leaping on concerns that the Fed would begin to unwind its program of purchasing Mortgage-Backed Securities (MBS) and Treasury bonds sooner than markets anticipated. In response to this, some Federal Reserve governors and regional bank presidents have made statements that the markets are misinterpreting the Fed’s intentions. This has calmed markets, allowing mortgage rate increases to flatten out, bringing the potential for declines before the week is out.
“We’ve always known that the Fed will end QE3 at some point,” adds Gumbinger. “What we don’t know, and even the Fed may not yet know, is when that process will begin and how quickly it will come to a conclusion. This will depend upon how well the economy performs, especially job growth and inflation. Whether mortgage rates can ease or will continue to move higher depends on these factors, starting with the June employment report due out Friday.”
Another huge drop for refinance applications
After another measured week of mortgage-rate increases, borrowers pulled back as mortgage applications fell by 11.7 percent during the week ending June 28. Refinance applications were down 16 percent (lowest level since July 2011), and the purchase index was down by a less-dramatic 3 percent
“Mortgage rates reached their highest point in two years last week,” Mike Fratantoni, MBA’s vice president of research and economics, said in a release. “At these rates, many fewer homeowners have an incentive to refinance, and refinance application volume declined more than 15 percent. With this decline in volume, the refinance share dropped to its lowest level in more than two years. Purchase application volume also declined, but not nearly to the same extent, as affordability remains strong.”
The share of refinance applications was down to 64 percent, its smallest share since May 2011. ARM applications increased to 8 percent last week, its highest point since July 2008.