Reports of rising mortgage rates may be reason for a decrease in mortgage application activity seen in the most recent Mortgage bankers Association's Weekly Mortgage Applications Survey. After bouncing back from a dormant amount of volume in the first month of the year, all indices fell the week ending February 8.
The Market Composite Index, the overall measurement of volume dropped 6.4 percent from the previous week when measured on a seasonally adjusted basis and was down 5 percent on an unadjusted basis.
When narrowing in on applications for those buying, the Purchase Index also took a weekly hit, decreasing a notable 10 percent when adjusted and 4 percent when unadjusted. Despite the declines reported the first full week of February, the PI was 15 percent higher than seen the same week a year earlier, indicating more Americans are making the investment and are confident in their ability to be homeowners.
Prospective buyers may view news of rising mortgage rates as a negative factor, however, this positive increase is indicative of widespread housing market improvements. Those who already own homes have been taking advantage of affordability through refinancing their original mortgage. According to the MBA report, the refinance share of mortgage activity matched that seen a week ago, as refinances accounted for 78 percent of all applications. However, the Refinance Index decreased 6 percent from the week before.
Other information revealed that the share of refinance applications through the Home Affordable Refinance Program matched the level from the previous week. In addition, the adjustable-rate mortgage share of applications rose to 4 percent, but fixed-rate mortgage remain a more popular option for buyers.
The drop in applications could be a direct reflection of rising mortgage rates,though Freddie Mac's Primary Mortgage Market Survey for the week ending February 7 showed rates for both FRMs and ARMs either remained the same or fell slightly.
According to the report, the average rate for 30-year ARMs was 3.53 percent, though it remained well below the 3.87 percent average seen the same week a year earlier. The average rate for 15-year FRMs was 2.77 percent, a decrease from the 2.81 percent rate from the week before.