In a mortgage market that has become comfortable with near record-low interest rates, any move higher makes a difference. A slight increase last week caused total mortgage application volume to fall 2.3 percent, according to the Mortgage Bankers Association’s seasonally adjusted report.
Applications to refinance led the way down, falling 3 percent for the week after marking a sharp rise during the previous week. The giveback could have been expected but was likely pushed by the increase in interest rates.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $424,100 or less increased to 4.20 percent from 4.19 percent, with points decreasing to 0.39 from 0.40, including the origination fee, for 80 percent loan-to-value ratio loans. The effective rate increased from last week.
“Treasury rates started to fall mid-week, as disappointing data on the U.S. trade deficit and non-manufacturing sector were released, but picked up later in the week, as market fears of a government shutdown eased and the November employment report showed strong job growth,” said Joel Kan, an MBA economist.
Mortgage applications to purchase a home fell 1 percent for the week but are 10 percent higher than the same week a year ago. Several local Realtor associations are noting a jump in newly signed contracts to buy existing homes recently. That may be due to the prospect of higher interest rates in 2018 and some buyers wanting to close before the end of the year, given potential changes to the mortgage interest deduction in the Republican tax plan.
“The residential market in Northern Virginia during November provided some impressive sales statistics, counter to historical trends where the month is generally one of the quietest for selling,” Tracy Comstock, principal broker of SilverLine Realty & Investment, said in a report from the Northern Virginia Association of Realtors.
In the report, Comstock suggested the increased sales transactions could be attributed to the proposed interest rate hike, causing hesitant buyers to make housing decisions now.
Washington, D.C., another high-cost market, also saw a spike in signed contracts in November. They rose 14.7 percent from last November. That topped the five-year November average by more than 10 percent.
Mortgage rates will likely make a more decisive move this week. The Federal Reserve is widely expected to raise its lending rate this week, and members of the House and Senate conference committee on the tax plan appear to be close to agreement on a final bill.
Source: cnbc economy
Weekly mortgage applications fall 2.3% as rates rise