US homebuyers have come to expect constantly declining mortgage rates. After all, any recent increases in mortgage rates have been fleeting - just waiting a month or two would generally result in a lower rate. That expectation of cheaper mortgages has resulted in higher sensitivity to rate fluctuations. And now that the 30-year rate has stopped declining (
see discussion), some buyers are sitting back and waiting for the rate to go lower.
Reuters: - Applications for home mortgages fell to their lowest level since early November last week and the purchase index fell after a five-week climb, an industry group said on Wednesday.
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| Source: Econoday.com |
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 12.3 percent in the week ended December 14.
The MBA's seasonally adjusted index of refinancing applications fell 13.8 percent, while the gauge of loan requests for home purchases, a leading indicator of home sales, fell 4.8 percent, dropping from its high point on the year.
Many had expected that the Fed's latest action will push rates even lower, but that wasn't the case.
Econoday: - Higher mortgage rates in the December 14 week cooled activity at mortgage bankers where purchase applications fell 5.0 percent, a drop that ends five straight weeks of gains. The report notes that rates increased, not decreased, following the Fed's decision last week to buy an additional $45 billion of Treasuries per month. MBA specifically cites the increase in rates, up three basis points in the week for 30-year conforming mortgages to 3.50 percent, for a big 14 percent drop in refinancing applications.
Ironically, the fiscal cliff negotiations is the one factor that could push mortgage rates lower by threatening to derail fragile US economic recovery and lowering treasury yields. But if by some chance Washington reaches a decisive resolution, mortgage rates declines may be over for now.
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