This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Mortgage Applications Drop As Rates Spike

NEW YORK ( TheStreet) -- Mortgage applications are plunging as mortgage interest rates continue to climb.

According to the latest survey by the Mortgage Bankers Association, mortgage applications decreased 13.5% in the week ended Sept.6 from a week earlier, on a seasonally adjusted basis.

The Market Composite Index declined 23% on an unadjusted basis. As has been the case since rates began their rise in May, refinance applications led the decline, plunging 20%. Refinance applications have plummeted 71% from their peak level in May and are at the lowest level since June 2009.

The share of refinances to total applications dropped to 57% from 61% in the previous week. Refinances as a share of total applications were at the lowest level since April 2010.

The MBA's seasonally adjusted Purchase Index was down 3% from a week earlier. On an unadjusted basis, purchase applications declined 14%, though they were still 7% higher than a year earlier.

The average contract interest rate for 30-year fixed-rate mortgage loans with conforming loan balances ($417,000 or less) increased to 4.80% from 4.73% during the week, with points increasing to 0.46 from 0.33 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

The average contract interest rate for 30-year fixed-rate mortgage loans with jumbo balances (greater than $417,000) increased to 4.84% from 4.71%.

The average contract interest rate for 30-year fixed-rate mortgage loans backed by the Federal Housing Administration (FHA) increased to 4.56% from 4.48%.

Trulia economist Jed Kolko noted in a blog post that this is fairly typical behavior of applications in response to rising interest rates.

Refinance applications typically fall 45% in the month of a spike in interest rates and continue to fall in the following two months.

New home sales and existing home sales dropped 3 months after a spike, so the full impact of May's interest rate climb should be seen in August sales which will be reported later this month.

Still, compared with the rate impact on refinancing, the effect on sales and purchase applications isn't as significant.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
SPY $208.01 0.62%
XHB $36.77 0.44%
DIA $177.63 0.54%
IYR $74.00 1.54%
AAPL $125.69 -0.25%

Markets

DOW 17,776.91 +93.33 0.53%
S&P 500 2,081.34 +12.58 0.61%
NASDAQ 4,997.4590 +5.5190 0.11%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs