The volume of mortgage applications rose last week, including the number of applications to refinance loans, as interest rates were lowered to 4.23 percent.
The Mortgage Bankers Association (MBA) released its report on mortgage applications Wednesday, reports 24/7WallSt, which showed a 4.6% week-on-week increase on a seasonally adjusted composite index for the week ending July 3. This already includes an adjustment for the Independence Day holiday. Total volume of mortgage applications is up 22 percent higher than the previous year.
Applications to re-finance loans also increased by 3 percent week-over-week, while applications to purchase properties surged to 7 percent, reports CNBC. This is 32 percent higher than the same period last year.
The increasing trend in mortgage applications is spurred mostly by the dip in interest rates. According to the Mortgage Bankers Association, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.23 percent from 4.26 percent, with points increasing to 0.37 from 0.33 (including the origination fee) for 80 percent loan-to-value ratio loans. This is lower than previous week's interest rates.
Lynn Fisher, the association's vice president for research and economics, said the trend in last week's mortgage application were consistent with the ongoing shift towards a purchase market. "Although contract interest rates fell by 3 basis points due to economic uncertainty abroad last week, they remain 40 basis points above April levels and the refinance share of mortgage applications fell to 48 percent, the lowest rate since June of 2009," said Fisher.
The interest rates also took a small dive Tuesday, with majority of lenders quoting a 4 percent loan rate for a conventional 30-year fixed mortgage. However, bond yields regained its footing at the end of the day and the rate did not materialize, reports the same CNBC article. There's been a lot of volatility in the market and minutes from the Federal Reserve's meeting released Wednesday only adds to the uncertainty.
Matthew Graham, chief operating officer of Mortgage News Daily, wrote: "Volatility is the only safe bet. For the past three business days, that volatility has generally left mortgage rates in better shape, but until we see a more stable change in market behavior, it's safer to treat such days as 'lock opportunities' as opposed to promises of further improvement."