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May 1st, 2014

Low mortgage rates fail to ignite mortgage applications or home sales

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int rate QMarkMortgage rates are still low by historical standards, yet the latest data suggest cheap financing alone is no longer enough to lure more people to apply for mortgages.

The Mortgage Bankers Association’s (MBA) weekly index that measures the volume of new refinance and purchase applications dropped 5.9 percent for the week ended April 25 compared with the prior week.

The index’s refinance portion dropped 7 percent from the prior week while the purchase portion dropped 4 percent for the same period.

Mortgage applications slip to 13-year low

In a statement, MBA Chief Economist Mike Fratantoni said the MBA’s index hit its lowest level since December 2000. Purchase applications were 21 percent lower than they were a year ago, and refinance activity dropped to the lowest level since 2008.

The share of adjustable-rate mortgages, or ARMs, was unchanged at 8 percent of total applications.

The MBA survey of mortgage bankers, commercial banks, thrifts and other lenders includes more than 75 percent of U.S. retail residential mortgage applications and has been conducted weekly since 1990.

Mortgage rates ‘not part of the problem’

Mortgage rates aren’t one of the myriad factors that arguably are holding back the housing market recovery this spring, according to the latest HSH.com weekly Market Trends newsletter.

“Even though they are above the 60-odd year lows set in December 2012 and nearly match last May, mortgage rates are not really part of the problem, since they remain favorable by almost any measure,” said Keith Gumbinger, vice president of HSH.com and author of the Market Trends.

According to HSH.com’s weekly Mortgage Rates Radar, a Tuesday-to-Wednesday wraparound weekly mortgage rates survey, the average rate for conforming 30-year fixed-rate mortgages remained relatively steady at 4.38 percent, while the conforming 5/1 Hybrid ARM rates remained unchanged, closing the survey at 3.16 percent.

Home sales uninspired

Sales of existing homes can be characterized as flat. Supplies of for-sale homes remain tighter than optimal, and sales of new homes improved early in the year and then slumped in March.

“There’s little to suggest that a significant change in the slow pattern (of home sales) is underway,” Gumbinger said.

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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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