Mortgage has been a staple in the lives of most Americans today who have opted to subsidize their dreams. It's that one scourge that has found its way to many of our humble homes, invited but not welcome. Just the very thought of it is daunting enough, but recently, one of life's greatest banes has just turned itself to a whole new spookier monster.
The average contract interest rate for fixed-rate mortgages with conforming loan balances, equivalent to $417,000 at the maximum, has soared higher to about 4.01 percent according to CNBC reporter, Diana Olick. This mortgage rate ascent has been the highest since a 3.96 percent spike during the first week of January, this year.
Just about a month ago, interest rates for mortgages has reached its peak for this year that caused, almost simultaneously, the mortgage application numbers to spiral down. The loan applications reportedly dipped by about 13 percent on that week as per the Mortgage Bankers Association; although, the numbers are still relatively higher as compared to that of the previous year. By March 6th, the overall number of loan application has taken a downfall at 1.3 percent every week on a seasonally adjusted basis.
The downturn has taken the biggest toll on the volume of refinancing application which accounts for almost 80 percent of the total applications the past few years. Refinancing loan application volume today was reduced to just 60 percent.
There was a 3 percent fall in loan applications to refinance while, on the other hand, the loan application to buy a home had a minimal increase of 2 percent. This increase was attributed to the high-income buyers of more upmarket homes.
The cause of these rising mortgage loan rates was brought about by the unexpected better turnout in the employment report for the month of February. Better employment report prompts investors to believe that there will be a potential increase in the Federal Reserve's lending rate at the turn of this year 2015.
Do not expect a significant change in the fixed-rate loan rates for a 30-year mortgage this year as 4 percent may be the new norm; and, could possibly increase more before the year ends.
It's pretty much understandable that the volume of mortgage applications drop as rates continue its upsurge. I mean, that's just like taking a cue from Mr. Newton's third law of motion. And, that's just like what we normally do with spookier things coming our way.
