Mortgage Loan Rates Going Up, Applications Higher Too

Paul Ausick

The Mortgage Bankers Association (MBA) released its weekly report on mortgage applications Wednesday morning, noting an increase of 8.3% in the group’s seasonally adjusted composite index for the week ending January 5. Mortgage loan rates rose last week on three of five loan types that the MBA tracks. Weekly results include an adjustment for the New Year’s Day holiday and results for the prior week were revised.

On an unadjusted basis, the composite index increased by 46% week over week. The seasonally adjusted purchase index increased by 5% compared with the week ended December 29. The unadjusted purchase index increased by 44% for the week and is now 1% lower year over year.

The MBA’s refinance index increased by 11% week over week, and the percentage of all new applications that were seeking refinancing rose from 52.1% to 52.9%.

Adjustable rate mortgage loans accounted for 5% of all applications, down 0.3 percentage points from the prior week.

The first two days of this week have added an eighth of a point (0.125%) to mortgage interest rates, according to Mortgage News Daily. Interest on a 30-year fixed conventional mortgage hit 4.14% on Tuesday. That sharp rise is “an uncommonly big 2-day move.”

There two drivers of this rate hike are the higher yields on 10-year Treasuries and higher oil prices. Higher yields may be due to speculation about the president’s $1 trillion infrastructure plan that traders see as pushing inflation higher. Higher oil prices also tend to lift inflation expectations.

If traders and investors are looking for signs of coming inflation, they’re not hard to find. The effect on mortgage interest looks, at this point, to be toward higher rates.

According to the MBA, last week’s average mortgage loan rate for a conforming 30-year fixed-rate mortgage ticked up from 4.22% to 4.23%. The rate for a jumbo 30-year fixed-rate mortgage increased from 4.14% to 4.16%. The average interest rate for a 15-year fixed-rate mortgage rose from 3.64% to 3.66%.

The contract interest rate for a 5/1 adjustable rate mortgage loan decreased from 3.53% to 3.50%. Rates on a 30-year FHA-backed fixed-rate loan ticked down from 4.17% to 4.16%.