Applications are up, and so is industry optimism

by Donald Horne14 Sep 2015
The stock market scare of August 24 didn’t deter homebuyers, allowing lenders to breathe a sigh a relief after looking at the most recent numbers from the Mortgage Bankers Association’s weekly survey.

“Everyone has felt tremendous relief that buyers are not backing away from getting into their dream home,” says Jason Spears, a district manager in Chandler, Ariz. for Academy Mortgage. “Buyers seem to now understand that rates and prices will never be low at the same time again in our lifetimes.”

The number of mortgage applications increased once again for the week ending August 26, according to the MBA survey, as individuals continue to apply for home mortgages despite the economic downturn seen earlier in the week. 

According to the MBA's survey, total applications rose 0.2% when compared to the previous week on a seasonally adjusted basis. 

Government purchase loans were largely responsible for the increase seen for the week ending August 26, as home loan applications through the Federal Housing Administration increased by 5.6% week over week, and those through Veterans Affairs jumped 5.2% over the course of the last week. 

The FHA share of applications for home loans rose to 13.1% - this is up from 12.9%. The VA applications accounted for 11.4% of all applications, which is more than the 11.1% seen the week prior.

But the reaction this time around from consumers – compared to a couple of years ago – is completely different.

“In the middle of 2013, when rates jumped over one percentage point, applications dropped in half and buyers backed away from the idea of purchasing a new home,” says Spears, “but buyers do not appear to be reacting the same in 2015, despite dramatic market fluctuations like the stock market drop in August.”

However, it appears that the market downturn did have an effect.        

The Refinance Index showed a 1% decrease when compared on a week-over-week basis. Refinance applications making up total applications for home loans decreased from 55.5% to 55.3%. In addition, adjustable-rate mortgage applications dropped to 6.8% of all applications. 

Low interest rates seem to be keeping the fire stoked for mortgage originations. The MBA indicated the average interest rate for a 30-year fixed-rate mortgage with jumbo loan balances fell from 4.03% to 4% on a week-over-week basis. 

In addition, the average interest rate for 15-year fixed-rate mortgages slid to 3.33% from 3.37%, and the rate for a 5- and 1-year adjustable- rate mortgages fell to 2.96% from 2.98%.

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