With mortgage rates down, applications are up
Posted on Thursday, January 14, 2016 at 10:26:30 AM
Mortgage rates continue to undermine expectations of growth following the Federal Reserve's December decision to raise interest rates.
On Thursday, Freddie Mac released the results of its Primary Mortgage Market Survey, showing that for the second week in a row, mortgage rates have fallen. After averaging 3.97 percent last week, the 30-year fixed-rate mortgage has dropped to 3.92 percent with an average 0.6 point. At this time one year ago, it averaged 3.66 percent.
"Long-term Treasury yields continue to drop, dragging mortgage rates down with them. Turbulence in overseas financial markets is generating a flight-to-quality which benefits U.S. Treasury securities," said Sean Becketti, chief economist for Freddie Mac. "In addition, sagging oil prices are capping inflation expectations."
As rates fell, applications rose. According to the Mortgage Bankers Association's Market Composite Index, mortgage loan application volume increased 21.3 percent for the week ending Jan. 8. In the same time frame, the refinancing share of overall residential financing activity jumped 24 percent.
"MBA's purchase mortgage application index reached its second highest level since May 2010 on a seasonally adjusted basis last week, second only to the week prior to the implementation of the Know Before You Owe rules," said Lynn Fisher, vice president of research and economics for the MBA.
"Bolstered by strong fourth quarter growth in jobs and continuing low rates, the results are similar to levels we saw in early December, suggesting that the purchase market's strong finish to 2015 may be continuing," said Fisher.