Rate Decrease Results in Mortgage Application Increase

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A slight drop in mortgage loan rates is credited for an increased number of mortgage applications, after the number of applications had seen decreases over the prior month. The second week of October saw a 3.6 percent increase in total mortgage application volume, according to the Mortgage Bankers Association. Applications to refinance a home loan increased by 3 percent, though the overall volume is still lower than it was at the same time last year.

The average contract interest rate for a 30-year fixed-rate mortgage, with a conforming loan balance of $424,100 or less, declined from 4.16 percent to 4.14 percent. Points remained the same at 0.44, including the origination fee, for 80 percent loan-to-value ratio loans.

“Treasury yields were relatively flat last week. While the FOMC minutes showed an increased likelihood of one more rate increase in 2017, nudging rates slightly higher, the week’s gains were offset by a downturn on Friday due to weaker than expected inflation data,” said Joel Kan, a Mortgage Bankers Association economist, with regard to the second week of October.

Mortgage applications submitted with the aim of purchasing homes, which are less rate-sensitive, increased by 4 percent during the second week of this month and are now up 9 percent compared with the same week in 2016. Home sales have slowed mostly due to inventory shortages, rather than due to increasing interest rates.

“In the bigger picture, rates are attempting to push lower after rising fairly quickly from early September through early October,” wrote Matthew Graham, Chief Operating Officer of Mortgage News Daily. “The weakness [read: slightly higher costs] over the past two days doesn’t derail that effort, but that could change if the weakness persists for another day or two.”

The most recent Home Mortgage Disclosure Act data was just released by the Federal Financial Institutions Examination Council, and it points to which lenders are controlling the majority of the mortgage origination market. The data, which is composed of information submitted by mortgage lenders for 2016, shows which lenders dominated the market.

The total number of originated loans of all types and purposes increased by close to 1 million between 2015 and 2016 – an increase of 13 percent. Refinance originations increased by 16 percent, and the number of home purchase loans increased by close to 11 percent.

The most recent data available for the Naples, Florida area shows pending home sales increased by 12 percent in both the $300k-$500k category and the $2M+ category, and 11 percent in the $500k-$1M category in the 12 months ending August 2017. The same report shows that closed sales for the area increased by 14 percent in the $300k-$500k category and 15 percent in the $2M+ category in the 12 months ending August 2017. The number of overall cash sales has decreased, which means more consumers are turning to more traditional financing through bank-originated mortgage loans. The recent decrease in rates is a signal that this is a good time for anyone looking to enter the market to make a move and take advantage of the rate decrease.