Increase in mortgage rates causes the buyers to steer clear from applying for a mortgage loan which resulted to the decrease of mortgage applications by 3.2 percent.
According to a report by cnbc.com, Mortgage Bankers Association said the decrease mainly came from "larger loans for more expensive homes." Also, home refinancing applications decreased with 5 percent from last week's percentage. However, refinancing is still 4 percent higher than last year's same week.
Michael Fratantoni, the association's chief economist, said "The 30-year fixed rate has increased almost 20 basis points since a recent low, and the refinance index has decreased in four of the last five weeks."
"Average purchase loan size climbed to a new survey high last week, as the higher end of the market continues to grow more quickly than the entry level," he added.
The report also said that "the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.14 percent from 4.18 percent, with points increasing to 0.49 from 0.45 (including the origination fee) for 80 percent loan-to-value ratio loans."
High home prices keeps new home buyers to keep from "making a strong showing in the fall market." Also, the supply of houses for sale are fewer making the national home index to increase by 4.9 percent in September.
David Blitzer, S&P Dow Jones Indices committee chairman and managing director, said "It [some buyers might buy homes while rates are low] is not likely to push mortgage rates far above the recent level of 4 percent on 30-year conventional loans. In the last year, mortgage rates have moved in a narrow range as home prices have risen; it will take much more from the Fed to slow home price gains."
A report by housingwire.com detailed the changes in the mortgage rates after an increase has taken into effect. The reposrt shows that "The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) fell from 4.18% last week to 4.14%.
"The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) came in at 3.99%, falling from 4.05%."
"The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.87% compared to 3.90% a week ago."
"The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.39% from 3.40%, while the average contract interest rate for 5/1 ARMs increased to 3.19% from 3.18%."
