Purchase and Refinance Applications Increase

CF Funding shares positive news for the housing market today, as both refinance and purchase applications have increased for the week ending June 6. The Market Composite Index by the MBA reported yesterday that mortgage applications increased by 10.3 percent last week, which is a 22 percent increase from the previous week (on a seasonally adjusted basis). Readers should note that Memorial Day fell on the previous week, however, data was adjusted to reflect the holiday.  

The refinance index saw an increase of 11 percent from the previous week, and the purchase index saw an increase of 9 percent from the previous week, on a seasonally adjusted basis. The purchase index increased by 19 percent compared to the previous week on an unadjusted basis. However, unadjusted purchases were still 13 percent lower than the same week last year. CF Funding is confident that both purchase and refinance indexes will continue to rise as the housing market improves this year.

Refinances are still representing a large percent of mortgage activity, as the refinance share increased to 54 percent on the index last week, from 53 percent the previous week. Adjustable-rate mortgages were unchanged, representing 8 percent of total applications on the index. Interest rates increased slightly last week, as the reported 30-year fixed contract interest rate (for loans $417,000 or less) was 4.34 percent, up from the previous week’s 4.26 percent. Jumbo 30-year fixed rates also increased, at 4.27 percent last week in comparison to the previous week’s 4.22 percent.

The average interest rate reported for 30-year FHA loans increased slightly, from 3.99 percent to 4.06 percent. 15-year fixed-rate mortgage interest rates also increased from 3.39 to 3.43 percent. CF Funding is pleased to see that the increase in interest rates has not slowed down applications, as rates are still historically low and home affordability is rising. As seen in the graph, current rates near 4.5 percent are much lower than rates seen 5 years ago near 5.5 percent.

Today, rates saw a slight decrease with the best-execution 30 year fixed rate mortgage near 4.21 percent, in comparison to yesterday’s 4.25 percent. The 52-week low is about 3.97 percent, according to Mortgage News Daily, and the 52 week high is about 4.85 percent. Those interested in mortgage rate updates may find up-to-date information through the CF Funding website at www.cffunding.com/index.php/mortgage-rates.

Warm Weather Brings Out Homebuyers

According to the Mortgage Bankers Association, purchase applications have risen 3 percent last week in comparison to the previous week on a seasonally adjusted basis. CF Funding is happy to see applications rise as the weather has improved, allowing for more homebuyers to shop around and meet with lending specialists.  The increase was mainly seen in conventional loans, which saw a 4.0 percent increase in purchase applications.

Unfortunately, home purchase applications are still down 17 percent on an unadjusted basis from one year ago. Overall mortgage application activity saw a 3.5 percent decrease from one week earlier. According to CNBC, “some [are] still blaming the weak home sales market on rough weather in much of the nation” and “All-cash buyers continue to represent an outsized share of the housing market at over one- third of all sales.”

Refinances have seen a drop as interest rates rise, with an 8 percent decrease last week in comparison to the previous week. Refinances currently cover about 54 percent of mortgage activity, which is down about 68% from last year (when interest rates were lower).  This is the lowest amount seen since April 2010. Experts predict that refinances will continue to decrease in 2014 as rates continue to rise. According to the MBA, an increase in purchases will make up for some of this loss, but will not completely level out the decrease. There are many homeowners who could still benefit from a refinance this year before rates rise, and CF Funding loan specialists can offer a free consultation for those considering a refinance.

Average contract interest rates for a 30-year fixed mortgage with loan balances $417,000 or less were at 4.56 percent (highest since January), an increase from the previous week’s 4.5 percent.  Average contract interest rates for a 30-year with jumbo loan balances were at 4.45, an increase from the previous week’s 4.39 percent. Adjustable-rate mortgages saw no change last week, covering 8 percent of total applications.

Although interest rate increases may be discouraging to some homebuyers, CF Funding urges readers to stay optimistic, as a rise in rates is a sign of economic improvement, and allows homeowners to gain positive equity in their homes. CF Funding hopes to see a continued increase in purchase applications as the weather continues to improve. Those who are considering buying a home and would like to compare loan options from multiple lenders should contact a CF Funding loan specialist today by visiting www.cffunding.com or calling (630)328-8900.