Mortgage Loan Rates Mostly Dipped Last Week, Applications Down 3%

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The Mortgage Bankers Association (MBA) released its weekly report on mortgage applications Wednesday morning, noting a decrease of 2.8% in the group’s seasonally adjusted composite index for the week ending December 29. Mortgage loan rates dipped last week on three of five loan types that the MBA tracks. Weekly results include an adjustment for the Christmas holiday.

On an unadjusted basis, the composite index decreased by 42% week over week. The seasonally adjusted purchase index increased by 1% compared with the week ended December 22. The unadjusted purchase index decreased by 40% for the week and is now 3% higher year over year.

The MBA’s refinance index decreased by 7% week over week and the percentage of all new applications that were seeking refinancing rose from 51.8% to 52.0%.

Adjustable rate mortgage loans accounted for 5.3% of all applications.

Mortgage interest rates began 2018 by moving a bit higher as the stock market posted a solid gain on the first day of the new year. In order to attract buyers, bond markets have to raise yields, which in turn raises mortgage interest rates.

The same reasoning applies when inflation rises, eroding the value of the bonds that back mortgage loans. Investors demand a better return, yields on the bonds go up and mortgage loan interest rates follow.

In a story Tuesday, we cited a report from Bankrate.com that 2018 mortgage interest rates could be volatile, bouncing from a short-term low of under 4.0% to more than 4.5% over the course of the year. Bankrate expects mortgage loans to average around 4.5% for the full year.

According to the MBA, last week’s average mortgage loan rate for a conforming 30-year fixed-rate mortgage remained unchanged at 4.25%. The rate for a jumbo 30-year fixed-rate mortgage decreased from 4.21% to 4.13%. The average interest rate for a 15-year fixed-rate mortgage ticked down from 3.66% to 3.65%.

The contract interest rate for a 5/1 adjustable rate mortgage loan decreased from 3.56% to 3.40%. Rates on a 30-year FHA-backed fixed-rate loan increased from 4.15% to 4.17%.