A 3.2 percent drop has been recorded in loan applications due to definitive rise in mortgage interest rates and such is keeping borrowers at a distance.
The report, as shared by CNBC, came from Mortgage Banking Association, based on the previous week's seasonally adjusted basis. The most rate-sensitive are refinance applications, which also has a recorded decrease of five percent from the previous week, adjusted to the lowest level since early September.
Michael Fratantoni, the association's chief economist, says, "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."
In the same way, applications for home purchase also fell by one percent last week, although compared to the same week over a year ago, it is still 24 percent higher. "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," Fratantoni added.
Entry-level home-buyer are prevented from buying due to higher home prices and then there is the issue of tight supply of homes for sale which is the reason of the push of S&P/Case Shiller national home price index up by 4.9 percent in September compared with a year ago.
There is also news that Federal Reserve might increase its long-term interest rates, adds CNBC. It is causing some homebuyers to rush in while the interest rates are still low.
David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, said, "While this will make news, it 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."
On the other hand, Housing Wire reports that The Federal Housing Administration's total applications also decreased to 13.7% from 14.4% the week prio and the Veterans Affairs' share likewise decreased to 11% from 11.7% the week prior, while TheDepartment of Agriculture's share of total applications remained frozen at 0.7%."
