As the housing market continues to move into its peak season for activity, mortgage activity increased during the week ending June 1.
Purchase and refinance requests rose 1.3 percent from the previous week, according to a report from the Mortgage Bankers Association. It's believed that low rates were responsible for the uptick in activity. However, it was noted that the overall increase was spurred by refinancing, as the purchase composite of the report edged lower.
Rates reach new all-time lows
During the week, the rate for a 30-year FRM with a conforming loan balance of $417,500 or less dipped to 3.87 percent from a previous all-time low of 3.91 percent. In addition, the rate for a 30-year FRM jumbo loan fell to 4.13 percent from 4.23 percent a week earlier.
Meanwhile, the decline in mortgage rates also led to a rise in refinancing activity, as borrowers capitalized on their affordability to restructure their home loans into more favorable terms. Mortgage records indicated that the share of refinance requests accounted 78 percent of all activity. This is a slight increase from a week earlier, when the share was at 77 percent.
Mortgage activity could slow in the near future
However, some critics believe that the slight decline in purchase requests could be an indicator that recent negative developments in the economy are weighing on housing activity.
"The small fall in mortgage applications for home purchase suggests that, despite record low mortgage rates, the renewed weakness in the labor market is starting to weigh on housing demand," said Capital Economics property economist Paul Diggle.
Meanwhile, given the recent drop in consumer confidence, mortgage application activity could decline even further in the coming months, Diggle added.
Americans less confident in the economy in May
Consumer Confidence fell to an index of 64.9 in May from 69.7 a month earlier, according to a recent report from the Conference Board. This outcome was unexpected, as analysts from the company anticipated the score to increase to 70. This month-over-month decrease was the biggest drop recorded since October, when the index plummeted 6 points.
"Consumers were less positive about current business and labor market conditions, and they were more pessimistic about the short-term outlook," said Conference Board director of economic indicators Lynn Franco.
Specifically, factors such as falling home values, weak stock market and global economic fears were all believed to be weighing heavily on the positive sentiment of consumers.