Spike in mortgage rates reduces loan application activity with one exception


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The recent jump in mortgage rates At a level not seen since last summer, application activity generally stagnated last week, with the exception of a slight increase in the purchasing market.

Total claims were up just 0.5% from the previous week, according to the Mortgage Bankers Association. Written applications for refinances rose only 0.1% and seasonally adjusted buy applications jumped 2% in the week ending February 26.

The slight increase in buy apps may reflect a recent increase in indicative 10-year Treasury yields. The 10-year started at around 0.9% in 2021 but rose, and last week peaked at around 1.5% before slumping. Tuesday at the end of the day, the 10-year was just above 1.4%

“There has been quite a movement over the past 10 years,” said Michael Franco, CEO of SitusAMC. “It could come back down, but given the additional stimulus that’s likely to come out, infrastructure bills and bond market concerns about it, I think it might be a little stickier now.”

Sometimes refinancing gets a boost when rates increase because this prompts some borrowers to act out of fear of further increases, but in the long run, an increase in rates usually leads to a decrease in activity. The market’s share of refi fell to 67.5% from 68.5% in the week ending February 19.

Homebuyers tend to increase their market share when rates go up, and they’ve seen a seasonal increase in the past week as well.

“Purchase requests have increased, with an increase in government requests – likely from first-time buyers – lowering the average loan size for the first time in six weeks,” said Joel Kan, associate vice president of economic forecasting and industrial MBA, in a press release.

Overall, the share of loans in the public market increased as follows: Federal Housing Administration loans increased from 11.2% to 12.1%, products guaranteed by the Department of Veterans Affairs increased from 11.9% to 12.3% and mortgages from the United States Department of Agriculture edged up. at 0.4% from 0.3%

The overall average loan amount was $ 336,200, up from $ 344,800 the week before. The average purchase loan amount was $ 412,300 and the average refinance loan amount was $ 299,600, up from $ 418,000 and $ 311,100 the week before, respectively.

The average government loan amount was $ 262,100, which almost matches the previous week’s $ 262,300.

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