Mortgage applications increasedespite rising mortgage rates

For those considering purchasing a property, knowing that higher mortgage rates are indicative of a healthy housing market is important. While affordability may seem to be leaving with increasing home prices and rates, the Mortgage Bankers Association's Weekly Mortgage Applications Survey for the week ending February 1 revealed application volume rose 3.5 percent from the previous week.

Rising interest in homeownership is likely prompted by affordability extended by low mortgage rates and home prices, though both are expected to continue growing in 2013. When looking at the Market Composite Index on an unadjusted basis, activity increased 16 percent from the week before. The Purchase Index also saw a rise of 2 percent, bringing it to the highest level since May 7, 2010, according to real estate records from MBA. On an unadjusted measurement the index was up 21 percent and recognized as being 16 percent higher than the same time a year earlier.

Those who already made the major investment of purchasing a home can also take advantage of low mortgage rates. In the latest report, the Refinance Index rose 4 percent from the week before. In addition, the number of applications that were for refinances reached 78 percent, and despite being lower than the 79 percent refinance share of activity a week before, they still accounted for a majority of applications for the last week. 

Mortgage rates have been lower than 4 percent for fixed-rate mortgage throughout 2012 and are predicted to continue to offer affordability for those making the investment and current homeowners looking to refinance their initial mortgage. While ARMs only accounted for 4 percent, fixed-rate mortgage make up the large majority of applications and have historically. Freddie Mac has reported week-over-week gains throughout the second half of January. 

Freddie Mac's most recent Primary Mortgage Market Survey for the final week of January revealed the average rate for 30-year FRMs increased from 3.42 percent to 3.53 percent, marking the first week since September 13 for the average to go above 3.5 percent. The average rate for 15-year FRMs also rose to 2.81 percent from 2.71 percent. 

Frank Nothaft, chief economist and vice president of Freddie Mac noted that large gains in home sales and price have attributed to rising mortgage rates. 

"Mortgage rates continued to trend upwards this week amid a growing economy led in part by the recovering housing market," said Nothaft. "For instance, new home sales totaled 367,000 in 2012, the most in three years and reflected the first annual increase in seven years. Pending home sales in 2012 averaged its highest reading since 2006."


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