Mortgage applications in the week ending June 5 fell a seasonally adjusted 7.2% from a week ago, as higher mortgage rates discouraged homeowners from refinancing mortgages.
With the average rate on a 30-year fixed mortgage rising from 5.25% to 5.57%, the Refinance Index continued in a downward trending, declining 11.8 percent to 2605.7.
Mortgage rates are closely tied to the yield on the ten-year Treasury bond. In recent weeks, the yield on the benchmark security has approached 4% after holding below 3% for the first four months of the year.
In his testimony before a House Committee last week, Fed Chairman Ben Bernanke acknowledged that mortgage rates and yields on government bonds have turned higher.
Bernanke said the increase appears to reflect “concerns about large federal deficits but also other causes, including greater optimism about the economic outlook, a reversal of flight-to-quality flows, and technical factors related to the hedging of mortgage holdings.”
The chairman is probably right because investors are worried about a projected $4 trillion deficit that is anticipated over the next three years, and with it, the huge supply of government debt that is expected to flood the markets.
Meanwhile, the Purchase Index, which looks at the number of new applications that have been filed to buy a home, edged up just 1.1 percent to 270.7. Though slightly off the bottom, it remains near a cyclical low and does not appear to be corresponding to recent gains in the Pending Home Sales Index. I’d like to see purchases trend toward and pass 300, which would be another indicator that housing sales have bottomed.
For more info and the latest look at the trade deficit: please see my blog Tomorrow's Economy Today.
Comments
Good information. Just found your blogs and read most of them. Sent your site to my associates. It would make sense that lower mortages rates would clearly benefit most people as well as the economic health of the country. Timely topics.
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