MARKET TRENDS: Home Purchase Demand Catches Up After Fall in Mortgage Rates

Mortgage activities are picking up, as mortgage applications rose sharply in the last week, mitigating losses in the week ended June 26, 2015. Mortgage applications for the U.S. homes climbed for the week ended July 3, 2015 with a fall in interest rates. Fixed 30-year mortgage rates with conforming loan balances ($417,000 or less) averaged at 4.23% in the week ended July 3, 2015, down 3 basis points from 4.26% in the previous week. This triggered a 4.6% rise in the seasonally adjusted Market Composite Index for mortgage applications, which includes both refinancing and home purchase demand, said the Mortgage Bankers Association on Wednesday. The seasonally adjusted Mortgage Application Index slipped 4.7% for the week ending June 26, 2015. On an unadjusted basis, the Index decreased 6% compared with the previous week.

The seasonally adjusted Purchase Index, a gauge of loan requests for home purchases and a leading indicator of home sales, rose 6.6% compared to the week ended June 26. The unadjusted Purchase Index decreased 4% compared with the previous week and was 32% higher than the same week one year ago. The refinance share of mortgage activity reached its lowest level since June 2009. Its market share decreased to 48% of the total applications from 48.9% in the previous week. The Index of Refinancing Applications rose 2.7% in the last week. Refinancing activities remained low in the previous year with higher interest rates. Last year was the worst for refinance activity since 2000. The Index covers over 75% of the U.S. retail residential mortgage applications, according to the MBA. Mortgage loan rates decreased on all five loan types. Adjustable rate mortgage loans accounted for 7.1% of all applications, up from 7.0% in the prior week. The rate for a jumbo 30-year fixed-rate mortgage (with loan balance greater than $417,000) decreased from 4.21% to 4.18%. The average interest rate for a 15-year fixed-rate mortgage fell from 3.44% to 3.41%. The contract interest rate for a 5/1 adjustable rate mortgage loan decreased from 3.09% to 3.03%. Rates on a 30-year Federal Housing Association-backed fixed-rate loan slipped from 4.04% to 4.01%.

The U.S. housing sector has recently shown an uptrend with both new and existing sales rising. Chances are that the Fed will start its short term interest rate hike in September this year, which will push mortgage rates higher. Market Trends is provided by Fund&Grow – an organization dedicated to funding entrepreneurs and small business owners. Interested in $50,000 to $250,000 of business credit at zero or very low interest with no impact on your personal credit? Get funded now. You can also click here to sign up to get more market updates and cutting edge news about credit and funding for your business.