Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=208940
Story Retrieval Date: 3/10/2014 2:34:28 AM CST
Mortgage application dropped slightly last week after a spike the week before.
Higher mortgage interest rates dampen demand for loans
The number of mortgage applications dipped slightly last week as mortgage interest rates edged up for the first time in six weeks. Experts are predicting refinance applications will drop next year while house purchases will rise.
According to data released by the Mortgage Bankers Association, mortgage applications decreased 1.2 percent in the week ended Oct. 5. That compares with a 16.6 percent increase in the previous week. Interest rates for 30-year fixed-rate mortgages increased from 3.53 to 3.56 percent.
Applications to refinance existing mortgages fell 2 percent, the group reported, while applications for new mortgages increased 2 percent. Applications for home purchases climbed to their highest level since June.
New mortgage applications were 12 percent higher than the same week a year ago on a seasonally unadjusted basis.
Refinance applications made up 83 percent of total applications last week. That means when refinance applications drop slightly, there will be an outsized impact on the number of total applications.
Matthew Robinson, spokesman for the Mortgage Bankers, said the association expects refinance applications to slow down as interest rates inch up towards 4 percent over the next year. Refinance activity is particularly sensitive to interest rate changes, he said.
“We are forecasting about $1 trillion in refinances for 2012 and about $400 billion in 2013,” Robinson said. “As the overall economy picks up steam, we predict purchase applications will increase. We are forecasting about $400 billion in purchase applications for 2012 and more than $600 billion in 2013.”
The association surveyed mortgage bankers, commercial banks and thrifts, covering more than 75 percent of all U.S. retail residential mortgage applications in its weekly survey, which began in 1990.