Global| May 29 2013U.S. Mortgage Refinancings Drop Sharply With Higher Rates
by:Tom Moeller
|in:Economy in Brief
Summary
Higher interest rates prompted an immediate reaction in the mortgage loan market. Last week's increase in the effective rate on a 15-year mortgage to 3.17% left it at it's highest level since the last week of August. In tandem, the [...]
Higher interest rates prompted an immediate reaction in the mortgage loan market. Last week's increase in the effective rate on a 15-year mortgage to 3.17% left it at it's highest level since the last week of August. In tandem, the index of total mortgage applications from the Mortgage Bankers Association slumped 8.8% (-9.2% y/y), its third consecutive weekly decline. The drop reflected a 12.3% shortfall (-15.2% y/y) in applications to refinance an existing loan. Conversely, home purchase mortgage applications gained 2.6% (13.5% y/y) as home purchases continued their improvement since 2010.
Accompanying the rise in 15-year mortgage rates was the effective rate on a 30-year fixed rate loan. It increased to 4.01% last week while the rate on a Jumbo 30-year loan jumped to 4.15%. The 84 basis point spread between 15- and 30-year loan rates was nearly its record. The effective interest rate on an adjustable 5-year mortgage was stable w/w at 2.69%, up just slightly versus its low of 2.59% at the beginning of this month.
Applications for fixed interest rate loans fell 9.6% y/y while adjustable rate loan applications slipped 1.2% y/y. The average mortgage loan size was $222,500. The average size loan for home purchases was $267,100 last week while for refinancings it was $204,200.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey covers roughly 50% of all U.S. residential mortgage applications processed each week by mortgage banks, commercial banks and thrifts. The figures for weekly mortgage applications are available in Haver's SURVEYW database.
| MBA Mortgage Applications (SA, 3/16/90=100) | 05/24/13 | 05/17/13 | 05/10/13 | Y/Y% | 2012 | 2011 | 2010 |
|---|---|---|---|---|---|---|---|
| Total Market Index | 721.4 | 791.0 | 876.6 | -9.2 | 813.8 | 572.3 | 659.3 |
| Purchase | 210.6 | 205.3 | 211.6 | 13.5 | 187.8 | 182.6 | 199.8 |
| Refinancing | 3,723.3 | 4,245.5 | 4,805.8 | -15.2 | 4,505.0 | 2,858.4 | 3,348.1 |
| 15-Year Mortgage Effective Interest Rate (%) | 3.17 | 3.04 | 2.96 | 3.36 (5/12) |
3.25 | 3.97 | 4.39 |
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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