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Mortgage Applications Fall as Home-Loan Rates Near 7-Year High

Mortgage Applications Fall as Home-Loan Rates Near 7-Year High
(Dreamstime/FLYNT)

Wednesday, 13 June 2018 11:18 AM

U.S. mortgage applications decreased in the latest week as 30-year home borrowing costs rose near their seven-year peaks prompted by a selloff in U.S. bond market, the Mortgage Bankers Association said Wednesday.

The Washington-based group’s seasonally adjusted gauge on overall home loan applications fell 1.5 percent to 365.3 in the week ended June 8.

Interest rates on 30-year fixed-rate “conforming” home loans, whose balances are $453,100 or less, jumped to 4.83 percent from 4.75 percent the previous week.

Three weeks ago, it was at 4.86 percent, the highest since April 2011, according to MBA data.

Meanwhile, Goldman Sachs on Tuesday cautioned investors with U.S. mortgage-backed securities holdings face the risk of below average returns in the coming year due to rising bond yields and their current low yield premiums over comparable U.S. Treasuries.

After adjusting for risk, MBS on average have produced 0.35 percentage point more than Treasuries in annual total return since 1998, Goldman Sachs analyst Marty Young said in a research note, Reuters reported.

“We expect MBS returns over the next year to be lower than average historical returns, as rising yields will exert a downward drag on bond prices and tight mortgage vs. Treasury spreads will provide lower than average carry potential,” Young wrote.

Goldman is a “neutral” view on agency MBS or those bonds guaranteed by government agencies Fannie Mae (FNMA), Freddie Mac (FMCC) and Ginnie Mae as the sector and many asset classes would generate below average returns over the next year.

In related news, the Securities and Exchange Commission on Tuesday said Bank of America subsidiary Merrill Lynch, Pierce, Fenner & Smith Inc. will pay $15 million to settle charges that staff misled clients into overpaying for Residential Mortgage Backed Securities (RMBS).

Merrill Lynch agreed to repay more than $10.5 million to its customers and to pay penalties of approximately $5.2 million. The SEC found that Merrill Lynch traders and salespersons convinced the bank’s customers to overpay for RMBS by deceiving them about the price Merrill Lynch paid to acquire the securities, Reuters explained.

© 2018 Thomson/Reuters. All rights reserved.

   
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U.S. mortgage applications decreased in the latest week as 30-year home borrowing costs rose near their seven-year peaks prompted by a selloff in U.S. bond market, the Mortgage Bankers Association said Wednesday.
mortgage, applications, home, loan, rates
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2018-18-13
Wednesday, 13 June 2018 11:18 AM
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