Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=231322
Story Retrieval Date: 8/21/2014 11:01:39 AM CST
Mortgage Bankers Association/Paulo Cabral Filho, MEDILL
Mortgage applications rose 10 percent despite higher interest rates.
Despite higher interest rates, mortgage application rise
The Mortgage Bankers Association reported Wednesday that the number of mortgage applications increased 10.3 percent in the week ended June 6 compared with the previous week, due to an increase in both purchase and refinancing applications. The previous week’s results were adjusted for the Memorial Day Holiday.
The MBA Index, which surveys over 75 percent of all U.S. retail residential mortgage applications, showed that the adjusted Refinancing Index increased 11 percent from the previous week, while the Purchase Index rose 9 percent.
The results are positive despite the small rise in interest rates. The average contract rate for 30-year fixed-rate mortgages increased to 4.34 percent, up eight basis points from 4.26 percent the previous week.
According to an analysis by Anthony Sanders, professor of finance at George Mason University in Virginia, however, the numbers do not differ from those reported in the same period of last year, in fact, they have decreased.
“As I predicted last week, we would see a large bump in Purchase Index after Memorial Day, just like last year,” he wrote. “The Purchase Index is down 13% compared to this time last year.”
“I keep looking for signs of real improvement in mortgage applications,” Sanders wrote. “But given the labor figures and declining/stagnant incomes, I don’t expect to see any significant change until we add higher-paying full-time jobs rather than low-paying part-time jobs.”
Wall Street Journal economic blogger Ruth Mantell also pointed out the decrease in the year-ago period and agrees with Sanders' skepticism in the face of the positive results.
“Career stability and income are key drivers for mortgage borrowers. Recent jobs readings show that the labor market is firming, albeit at a leisurely pace,” she wrote. “It’s wise to use caution before throwing any parties over a single weekly data report.”