Total mortgage demand returned to its downward trend with a 3.7% drop after last week’s slight reprieve, according to the Mortgage Bankers Association weekly survey.
- Purchase Index was down 0.4% for the week and is now down 29% when compared to last year.
- Refinance Index fell a whopping 11% for the week and is now down 84% when compared to last year.
Break It Down. The refinance share of mortgage activity fell over two percentage points to 30.2% and the adjustable-rate mortgage share of activity saw a one percentage point increase to 10.4%.
Parabolic Rates. Mortgage rates were up a quarter point for the second week in a row. The 30-year fixed is now at 6.52% for the week ending September 23rd. This is a 50 bip rise in just two weeks and is now up 342 basis points when compared to last year, more than double last year’s 3.10% rate.
- The 15-year saw an even bigger 30 bip jump to 5.70% and the 5/1 ARM was up 16 bips to 5.30%.
Analysis. Joel Kan, MBA economist, said the latest jump in rates is making alternative mortgage products more attractive “The 30-year fixed rate was 6.52 percent, its highest level since mid-2008. After a brief pause in July, mortgage rates have increased more than a percentage point over the past six weeks…With the recent jump in rates, the ARM share reached 10 percent of applications and almost 20 percent of dollar volume. ARM loans remain a viable option for qualified borrowers in this rising rate environment.”
BOTTOM LINE: With rates reaching parabolic status, mortgage demand will remain depressed unless home prices start to fall substantially.