Recent data from the real estate market shows a six percent fall in the number of new mortgage applications. This follows the rise of the average interest rate for a 30-year fixed-rate loan from 3.62 to 3.68 percent.
News from the Mortgage Bankers Association (MBA) showed that the rise affected applications for the week ending October 7, compared to the previous seven days. Chief economist for the MBA Michael Fratantoni said, "As incoming economic data reassured investors regarding U.S. growth, and financial markets returned to viewing a December Fed hike as increasingly likely, mortgage rates rose to their highest level in a month last week. Total and refinance application volume dropped to their lowest levels since June as a result."
This trend follows that of refinancing, which, due to rate-sensitivity, has fallen for several weeks. The number of applications for new home loans fell by 3 percent, although it remains 27 percent higher than for the same period last year. Data from last year is likely to be skewed due to the mortgage rules that came into effect and delayed processing times.
The fall in new applications for mortgage loans shows the degree of sensitivity buyers have to even slight changes in interest rates. Levels remain competitively low when compared to historical data. However, real estate purchase prices are increasing aggressively, with a lack of inventory fueling the growth. For borrowers, this means a cut in their potential savings.
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