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Mortgage Demand Drops 2.5 Percent as Home-Loan Rates Hit 5-Year High

Mortgage Demand Drops 2.5 Percent as Home-Loan Rates Hit 5-Year High
(Olivier Le Queinec/Dreamstime)

By    |   Wednesday, 02 May 2018 10:30 AM

U.S. mortgage applications fell last week as interest rates on some 30-year fixed-rate home loans reached their highest levels in nearly five years, the Mortgage Bankers Association said Wednesday.

The Market Composite Index, a measure of mortgage loan application volume, decreased 2.5 percent on a seasonally adjusted basis from one week earlier, the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey said.

The Washington-based industry group said its seasonally adjusted measure on mortgage requests fell 1.6 percent to 258.1 in the week ended April 27, Reuters said.

The refinance share of mortgage activity decreased to 36.5 percent of total applications, its lowest level since September 2008, from 37.2 percent the previous week.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) increased to its highest level since September 2013, 4.80 percent, from 4.73 percent the week before. By contrast, the benchmark rate averaged 4.03 percent a year ago.

The average contract interest rate for 15-year fixed-rate mortgages increased to its highest level since February 2011, 4.21 percent, from 4.13 percent.

"Market sentiments about strong domestic growth and higher inflation in the U.S. pushed the 10-year Treasury to the 3 percent mark last week, the first time since 2014 that yields have hit that level," Joel Kan, an MBA economist, told CNBC.

Mortgage rates may be swayed by the looming monthly employment report at the end of this week and the Federal Reserve announcement laterWednesday.

"While the Fed is not even remotely expected to hike rates again at this meeting, investors are always tuned in to the verbiage of the announcement in case it offers clues about the future policy path," Matthew Graham, chief operating officer at Mortgage News Daily, told CNBC.

The surge in long-term U.S. mortgage rates has hurt prospective home purchasers' prospects amid the spring buying season, the Associated Press has reported.

It was the third straight week of increases for long-term mortgage rates.

Spiking interest rates on U.S. Treasury bonds, driven by rising commodity prices that boosted inflation expectations, helped lift long-term mortgage rates to their highest level since August 2013.

The interest paid by the government on its debt has been rising. The yield on the key 10-year Treasury note recently reached its highest level since January 2014 this week, blowing past 3 percent to 3.03 percent. In addition to influencing home borrowing costs, the 10-year rate also is tied to auto loans and other consumer credit, and the breach of the significant 3 percent level sent shock waves through financial markets.

People shopping for homes are dealing with higher mortgage costs and fewer properties for sale. Rising rates could further erode inventories as existing homeowners renovate homes rather than put them up for sale to avoid a more expensive mortgage that would come with a new house. If higher loan rates lead to fewer homes on the market, it could push prices higher and further squeeze would-be homebuyers.

Despite the increase in mortgage rates, homebuyers have snapped up newly built houses as the economic outlook has continued to improve in recent months. Sales of new U.S. homes jumped 4 percent in March, propelled by a surge of buying in the West, the government reported Tuesday. Sales last month showed a seasonally adjusted annual rate of 694,000. For the first three months of 2018, sales ran 10.3 percent higher than a year earlier.

Still, the solid sales growth for new homes also shows that many would-be buyers can't find existing homes that are available to purchase. Listings for existing homes sank to the lowest levels on record for March, the National Association of Realtors reported Monday.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country between Monday and Wednesday each week.

The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates.

(Newsmax wire services contributed to this report).

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Mortgage applications decreased 2.5 percent from one week earlier, according to data from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey for the week ending April 27.
mortgage, demand, home, loan, rates
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2018-30-02
Wednesday, 02 May 2018 10:30 AM
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