With the Federal Reserve deciding to dial down its month bond purchases, mortgage interest rates climbed higher while home refinancing tumbled, according to the latest report from the Mortgage Bankers Association’s, which includes two weeks of information.
For the week ended January 3, 2014, loan applications increased 2.6 percent from one week earlier on a seasonally adjusted basis. There have only been a handful of increases over the past eight months as the housing market is starting to return to a more sustainable pace.
The figure includes both refinancing and home purchase demand, and covers more than 75 percent of all domestic retail residential mortgage applications. The seasonally adjusted purchase index fell 1 percent from the prior week. After plunging by 9 percent two weeks ago, the refinance index gained 5 percent last week.
Overall, the refinance share of mortgage activity accounted for 63 percent of total applications, compared to 66 percent two weeks earlier. Since interest rates have been moving higher in recent months, refinance activity is not expected to pick up significant momentum anytime soon.
In December, the Federal Reserve decided to scale back its bond-purchasing program by $10 billion per month. Over the past two weeks, the average interest rate for a 30-year fixed-rate mortgage increased from 4.64 percent to 4.72 percent. Meanwhile, the average rate for a 15-year fixed-rate mortgage rose from 3.74 percent to 3.77 percent. Looking ahead, Zillow expects mortgage rates to exceed 5 percent for the first time since early 2010 this year.
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