Mortgage Applications On The Rise

The Mortgage Bankers Association announced today that U.S. mortgage applications rose in the last week of January. This number reflects the jump in demand for people that wanted to refinance their mortgage as interest rates have been on the rise. The index showed that mortgage applications for both purchase and refinance loans was up 8.6 percent to 795.4 after plummeting 38.8 percent during the previous week.

Borrowing costs on 30-year fixed-rate mortgages averaged 5.28%, which is up .06% from the previous week. Three weeks earlier mortgage interest rates were about 4.89%. which is the lowest rate recorded since the Mortgage Bankers Association started the survey back in 1990.

These rising rates make it harder for people to refinance, which is why the Federal Reserve has been working so hard to keep interest rates down. John Lonski, chief economist at Moody’s Investors Service in New York, stated that the recent trend to higher rates that we have been seeing is a setback for the U.S. housing market. “In this environment, we cannot afford to have mortgage rates going up, especially because of how critical the stabilization of housing is to any steadying of the overall economy,” Lonski said on Tuesday. “We cannot have a bottoming of the macro economy without first stabilizing home sales.”

Evidence of how interest rates effect the housing market can be seen by looking at the National Association of Realtor’s Pending Home Sales Index. This index went up 6.3% in the month of December, which is the first increase since August. This same time corresponds with the lowest interest rates on a 30-year fixed rate mortgage that we’ve seen in a long time.

To read more about mortgage applications rise as refinancing jumps head on over to CNBC.