The Mortgage Bankers Association touted an 8.4 percent spike in mortgage applications this week — even as interest rates hit their highest numbers since last fall.
According to the MBA’s Weekly Mortgage Applications Survey, mortgage application volume rebounded strongly following the Memorial Day holiday. Comparing volume over the past two weeks, purchase activity is up more than 6 percent, while refinance activity is down 5 percent.
The MBA attributed the boost to the holiday’s impact on business activity, strong job gains in May and the beginning signs of wage growth. However, current interest rates may tell another story.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 4.17 percent, its highest level since November 2014, up from 4.02 percent.
Those 30-year fixed-rate mortgages backed by the Federal Housing Administration increased to 3.9 percent, also the highest level since November 2014, up from 3.77 percent.
The average rate for 15-year fixed-rate mortgages increased to 3.37 percent, its highest level since November 2014, up from 3.27 percent.
The average interest rate for 30-year fixed-rate jumbo loans (greater than $417,000) also saw an increase. Those rates rose to 4.15 percent, their highest level since October 2014, from 4.01 percent.
Rising interest rates may be enticing potential homebuyers to pull the trigger before the Federal Reserve’s expected interest rate hike, according to economists.
“These increases really help the homebuying market,” Matt Weaver, of Florida-based PMAC Lending, told CNBC News. “It really gets buyers to really understand that, ‘Wait a minute, rates are at an all-time low, let’s react now, let’s react before they go higher.’”
But we may not see the trend continue, said Erin Lantz, vice president of mortgages at Zillow.
“Rates jumped sharply last week, first on the heels of news that the European Central Bank’s bond-buying program may end sooner than expected, then an exceptionally strong U.S. jobs report,” Lantz said. “We expect less volatility in this data-light week.”
MBA’s survey covers 75 percent of all mortgage applications taken in the United States. Respondents include mortgage bankers, commercial banks and thrifts.