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.
The slow increase in interest rates is putting a damper on mortgage applications. For the week ended May 22nd, the composite applications index, which includes both purchase mortgages and refinancings, decreased 1.6% after declining 1.5% for the prior week. The purchase applications index managed to gain a modest 1.0% after dropping 4.0% for the prior week. The small increase in purchase applications was the sole bright spot in the report. The refinance applications index dropped 4.0% on the week after increasing 0.3% for the prior week. Interest rates continue to climb with the average interest rate for conforming loans (mortgage amount less than $417,000) increasing to 4.07% as compared to 3.85% four weeks ago. (Source: Bloomberg)
What it Means for Mortgage Borrowers
The increase in interest rates over the past month is having a negative impact on mortgage applications with refinance applications being affected more than purchase applications. Although small, the increase in the purchase application index for the week shows the resiliency of a relatively inconsistent housing market. Despite the increase in rates, the May pending home sales and housing starts reports point to a significant jump in home purchases. Although interest rates have risen, they remain relatively attractive on a historical basis and low enough to pull home buyers into the marketplace. If you are renting right now, check out our Rent Payment Mortgage Affordability Calculator to determine what size mortgage you can afford based on your monthly rent payment. Additionally, use our INTEREST RATES feature to monitor mortgage rates and fees for lenders in your area as rates change on a daily basis.
The FREEandCLEAR Mortgage Expert