In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses the latest mortgage applications data.
- Seasonally adjusted applications to purchase homes rose 1.5% in the week ending January 24th compared to the prior week. The purchase index is roughly 12% lower than the same time in 2013. Last week’s improvement comes after a 3.5% drop in the prior week. Purchase applications have been volatile after a sharp increase in the week prior to the implementation of the new qualified mortgage rule two weeks ago.
- The Qualified Mortgage rule went into effect for all applications received on or after January 10th. The “QM” rule introduced stronger underwriting, fee and pricing protections for consumers, but those protections could also raise costs or limit credit access for some consumers.
- The average rate for a 30-year fixed rate mortgage as reported by the Mortgage Bankers Association eased five basis points from the prior week to 4.52%, and has eased nearly 14 basis points in the last 2 weeks.
- In a bit of a surprise, new purchase applications for conventional mortgages eased 0.3% following a decline of 2.9% in the prior week, but applications for government financing jumped 5.8%, bettering the prior week’s decline of 5.2%. This shift could hurt the relatively nascent revival of the private mortgage insurance business if it is sustained.
- Mortgage applications have been volatile since the implementation of the new qualified mortgage rule two weeks ago. Since then mortgage rates have eased helping to buttress applications. What’s more, the MBA’s index reflects a larger mix of retail lenders than small and mid-sized independents whose influence grew in the last two years as a result of the refinance boom. The qualified mortgage rule is likely to have a stronger impact on these small to mid-sized mortgage originators as they are not exempt from the rule nor do they have the deep legal resources to move aggressively in this new regulatory environment as many of the larger retail operations would. As a result of these two factors, this week’s reading may mask to some extent shifts in the market. Still, applications reflect the same moderate downward trajectory relative to last year as foot traffic, pending home sales and existing homes sales have displayed in recent months.