Mortgage Applications Continue to Drop Following Slight Rate Gain
Mortgage applications have once again dropped as a result of the slight increase in the average contract interest rate for 30-year fixed rate mortgages. Industry experts are also expecting to see a rate hike in June.
Mortgage applications dropped 3.4 percent for the week from the previous week, according to the Mortgage Bankers Association, reports CNBC. The said drop in the number of mortgage application this week may be a result of the slight gain in mortgage rates.
According to the publication, the average rate for 30-year fixed rate mortgages with conforming loan balances (up to $417,000) increased from 3.85 to 3.87 percent. Points for 80 percent loan-to-value ratio loans also increased from 0.35 to 0.36.
While the said drop in mortgage applications can be quite alarming, the publication reports that the volume of mortgage applications is still 14 percent higher than last year. Refinance applications also dropped to 6 percent for the week, but the applications were still 15 percent higher than the same period of last year.
"No one had anticipated that the Fed would raise rates at last week's meeting," said Michael Fratantoni, chief economist for the MBA. "But, MBA and others had expected somewhat more of a signal that they would be increasing rates again in June."
The said drop in mortgage rates attracted a lot of first-time home buyers into finally looking for a house of their own. However, as reported here on Realty Today, the continuous appreciation of prices of homes for sale in the market is starting to negate the savings from the low mortgage rates.
It was previously expected that homeowners would be receiving $44-savings because of the drop in mortgage rates. The continuous increase in the selling price of homes in the market, however, has reduced these savings to an average of $18 per month. In some markets, especially those in hot locations, these savings are completely negated.