2013-06-12ml-implode.com

For several weeks, mortgage rates have been bouncing around as investors try to predict what the Feds next move will be. Even though consumer sentiment has improved, recent mortgage activity is reflecting a different attitude towards unsettled interest rates at this time.

The Market Composite Index reported weekly by The Mortgage Bankers Association is a measure of mortgage application volume. For the week ending May 31th, mortgage application volume fell 11.5% from the previous week on a seasonally adjusted basis. On an unadjusted basis, volume dropped 20%. However, for the week ending June 7th, volume increased 5% on an adjusted basis and 16% on an unadjusted basis. Clearly, consumers are watching mortgage rates when considering submitting a mortgage application as rates have become volatile.

The Purchase index fell 2% on a seasonally adjusted basis for the week ending May 31st. However, the following week showed an increase of 5% on a seasonally adjusted basis and 14% on an unadjusted basis. While it is the beginning of the home buying season, erratic rates may actually be influencing consumers to purchase sooner.

Refinance activity shows a different story. While refinancing has been a major source mortgage activity in recent years, the Refinance Index fell 15% to the lowest level since the end of November 2011 for the week ending May 31st. This was the fourth consecutive week of declines in refinance applications. Of total mortgage activity, the refinance share decreased to 68% and was at the lowest level since early July 2011. For the week ending June 7th, the Refinance Index rose 5%. However, the level of refinances sits 11% lower than two week ago and 36% lower than the peak reached in the beginning of May. Refinances represented 69% of all mortgage applications for the week. Clearly, at this point, refinances have dropped back as rates have shown some increases.

HARP volume is also seeing some changes. For the week ending May 31st, HARP refinance applications remain unchanged at 32% of all applications for three consecutive weeks. However, the week ending June 7th saw a 3% drop in HARP applications which is now 29% of total refinance apps. HARP loans are now available to underwater homeowners, who have loans that were sold to Fannie Mae or Freddie Mac prior to June 1, 2009, until the end of 2015. Those who have FHA loans that are eligible for the FHA streamline refinance with reduced rates only have until the end of 2013 to get in on this offer.

The coming weeks and months will tell give a better picture of what is going to happen with rates and the effect on mortgage applications. At this point, even adjustable rate mortgage activity has increased to 7% of total mortgage application volume. The next Feds meeting will occur on the 19th, however, there may not yet be a clearer picture of what will happen over the next six months. The Feds continuation of QE3 is directly tied to the unemployment rate, which for the month of May, increased to 7.6%, according to the Labor Department. With this increase, hopefully the Feds will give reassurance to markets which will stabilize rates and get consumers off the fence before it is too late.

FreeRateUpdate.com researches and reports advertised rates of active lenders within the FreeRateUpdate.com network.



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