At FREEandCLEAR, we follow the Mortgage Bankers’ Association (MBA) mortgage applications index which measures both purchase and refinance applications for mortgage lenders across the country. An increase in the MBA applications index reflects an increase in mortgage applications while a decrease in the index reflects a decline in mortgage applications.
Despite a dip in interest rates, mortgage applications continued their six week slide for the week ended May 29nd. The composite applications index, which includes both purchase mortgages and refinancings, dropped 7.6% after declining 1.6% for the prior week. The purchase applications index declined 3.0% after increasing 1.0% for the prior week. The decline in purchase applications was attributed to the increase in interest rates over the past month. Also dragged down by rising interest rates, the refinance applications index dropped a whopping 12.0 on the week after decreasing 4.0% for the prior week. The positive news in the mortgage applications index report is that Interest rates ticked down after gradually increasing over the last month with the average interest rate for conforming loans (mortgage amount less than $417,000) falling to 4.02% from as compared to 4.07% for the prior week. (Source: Bloomberg)
What it Means for Mortgage Borrowers
There appears to be little doubt the the slow but steady rise in interest rates over the past five weeks has negatively impacted mortgage activity. Although overall mortgage application activity is up in 2015 as compared to 2014, the market has slowed significantly over the past several weeks. It will be interesting to see if the drop in interest rates on the week stimulates mortgage activity going forward, especially as we move into the peak Spring home buying season. It is important to emphasize that even with the recent increase in rates, mortgage rates remain at historical lows. Interest rates will continue to fluctuate based on economic and market conditions so it is more helpful than ever to use the INTEREST RATES function on FREEandCLEAR to monitor rates and fees for lenders in your area.
The FREEandCLEAR Mortgage Expert