Did Lower Mortgage Rates Fail to Entice Homebuyers?
The mortgage market managed to post its third consecutive weekly gain, but lower interest rates failed to attract homebuyers. In the latest update from the Mortgage Bankers Association, for the week ended May 16, applications for home loans increased 0.90 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the index gained 0.40 percent.
The Refinance Index posted the biggest jump in the report by climbing 4 percent higher from the previous week. However, the Purchase Index dropped 3 percent and was 12 percent lower than the same week one year ago. As the chart above shows, applications have struggled to gain momentum for a sustained period since the housing bubble collapsed.
“Renewed concerns about the state of the global economy, particularly in Europe, led to a flight to quality to US Treasury securities, thereby pushing interest rates down in the US,” said Mike Fratantoni, MBA’s Chief Economist. “Rates on conforming loans hit 6 month lows and jumbo rates hit 12 month lows. Refinance volume picked up somewhat as a result, but it still remains more than 65 percent below last year’s pace. Purchase volume continues to run more than 10 percent below last year’s pace.”