There are indications that the mortgage application volume is currently on the rise. According to the Mortgage Bankers Association’s seasonally adjusted report, the total mortgage application volume increased 1.6 percent a few weeks ago compared to the other previous weeks. Reports also have it that the interest rates for home loans are climbing again and that explains why many borrowers are getting back to their brokers. It is therefore apparent that the borrowers are currently worried about the possibilities of interest rates moving significantly higher in the coming months. More so, it is evident that refinance volume is leading the charge as it rose by up to 4 percent. Worthy to mention is also the fact that the rates were almost a full percentage point lower at the same time last year.
Further reports have it that there was a sudden increase in the refinance share of mortgage activity to 39 percent of total applications from 37.8 in the previous week. Thus, borrowers who were thinking the rates would instead go lower are currently reacting to a new surge in rates. As a matter of fact, the borrowers are hoping to get it now that the rates are still relatively good.
According to Joel Kan, an MBA economist, Treasury rates have equally increased in response to various pieces of data indicating economic strength, such as inflation, jobless claims as well as wage growth. That said, even though purchase applications have been slow all summer, they have gained on an annual basis in the past few weeks alone.
Of course, these rising rates have worsened the already existing problem of weakening affordability. This is however evident as buyers are currently pulling back from high priced markets like California, where houses are now staying in the market for longer even amidst the price cuts. Nevertheless, it is also clear that home prices have continued to witness gains albeit these smaller increases when compared to the situation in the past few years.
There are indications that mortgage rates will only continue to rise. Mike Loewengart, vice president of investment strategy at E-Trade, asserted that considering the additional rate hikes on the horizon, mortgage rates will likely only continue to rise and squeeze the market. According to Loewengart, even though there is a ton of positive signals with regards to the economy, the housing sector remains a glaring exception. Loewengart further opined that the period of expansion that has been enjoyed in the past decade could be winding down.