Borrowers came back to the mortgage market last week, thanks to a slight retreat in interest rates. Total mortgage application volume rose 5.8 percent for the week compared to the previous week.
Still, volume came in 28 percent lower than the same week a year ago. The Mortgage Bankers Association’s seasonally adjusted report includes an adjustment for the Presidents Day holiday.
The gains are not particularly impressive, given how weak mortgage volume has been this year. Applications to refinance a home loan rose 5 percent for the week, reaching the highest level since December, seasonally adjusted, but they are still 45 percent below year-ago levels. That is because interest rates are about 50 basis points higher than a year ago.
Mortgage applications to purchase a home saw a healthy 7 percent gain for the week, but with the spring season now in full swing, they should be even higher. Purchase volume is now 5 percent lower than a year ago. Demand for housing is strong, but the share of buyers using all cash is still relatively high, and entry-level buyers are faced with few available and affordable listings.
The average contract interest rate for 30-year fixed rate mortgages with conforming loan balances of $424,100 or less decreased to 4.3 percent from 4.36 percent, with points increasing to 0.38 from 0.35, including the origination fee, for 80 percent loan-to-value-ratio loans.
“Rates declined last week as investors favored U.S. Treasury bonds due mainly to political concerns from abroad,” said MBA economist Joel Kan.
The dip in interest rates may be short lived. Remarks by four Federal Reserve governors on Tuesday increased the chances for a March rate hike considerably. William Dudley said on CNN International that the “case for monetary tightening has become more compelling.”
The yield on the 10-year Treasury bond, which mortgage rates loosely follow, jumped after the remarks. A strong employment report for February will up the chances for a rate hike in March. The report is being issued on March 10.
Correction: This story was revised to correct the release date of the Labor Department’s jobs report for February. It’s March 10.