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 climb in interest rates over the past month put a damper on the mortgage applications index for the week ended May 8th. The composite applications index, which includes both purchase mortgages and refinancings, decreased 3.5% on the week after declining 4.6% for the prior week. The purchase applications index declined a modest 0.2% after gaining 1.0% for the prior week. The drop in purchase applications represents only the second time in the past seven weeks that the index has declined. The refinance applications index decreased 6.0%, a slight improvement as compared to the 8.0% decline for the prior week. Although interest rates remain low on a historical basis, the gradual increase in rates appears to be slowing the mortgage market. The average interest rate for conforming loans (mortgage amount less than $417,000) increased to 4.00% as compared to 3.85% just two weeks ago. (Source: Bloomberg)
What it Means for Mortgage Borrowers
The latest applications index report is a setback for the mortgage and real estate markets which had been showing building momentum over the past six weeks. Although interest rates are still relatively attractive, the increase in rates is likely one of the contributors to a slowdown in purchase mortgage applications on the week. Refinance activity appears to be more sensitive to interest rates, having experienced a more significant decline than purchase applications over the past several weeks. The Spring home buying season had started off strongly and we will watch future mortgage application index reports to determine if this week’s pullback was a temporary event or the start of a trend. Prospective home buyers can use our Mortgage Qualification Calculator to determine what size mortgage you can afford and our INTEREST RATES feature to compare lenders in your area to find the mortgage with the lowest rate and fees.
The FREEandCLEAR Mortgage Expert