Mortgage applications up, possibly from fear of rate hike
The fear of rising mortgage interest rates may have nudged people into action on homebuying in November.
Mortgage applications are down 0.7 percent from a week ago, the Mortgage Bankers Association reported Wednesday. But over the last month, mortgage applications for buying new and existing homes jumped 12 percent. The surge came as interest rates on 30-year fixed-rate conventional mortgages shot up to 4.27 percent from 3.77 percent.
“People who were thinking about buying maybe said, ‘I’ll buy now,’ ” said Michael Fratantoni, economist for the association. Yet, he said, the recent surge may have also happened partly because mortgage credit has become more available and also because the job market has improved and the election relieved some uncertainty about the future.
Meanwhile, refinancing activity plunged 28 percent last month. The downturn is typical, Fratantoni said. “Refinancing is almost entirely driven by rates,” so when rates climb, people decide not to refinance existing mortgages.
The average mortgage loan reached $247,563 in the third quarter, an all-time high since the Mortgage Bankers Association began tracking that figure, the organization reported Wednesday.
Since the election, expectations of higher inflation have risen and 10-year Treasury bond yields have moved up a sizable half of a percentage point in anticipation of some inflation and a greater willingness by the Federal Reserve to raise rates.
The Fed is expected by economists to raise interest rates a quarter of a percentage point next week and slowly adjust rates higher in 2017.