Refinancing down, purchases up as Mortgage Rates Improve

Refinancing down purchases up as Mortgage Rates ImproveAs the mortgage rates spiked recently, the number of applications for refinancing has dropped again. The drop in refinancing is of no surprise, as the point of refinancing is to save money on a loan and when the rates are higher, fewer people would benefit from refinancing their loans.

According to the Mortgage Bankers Association, the week ending Aug. 16 saw refinancing applications fall 8 percent from the previous week and down 62.1 percent from its recent peak, which was attained the week of May 3, 2013. Refinancing, when considered as a share of mortgage activity, dropped another percentage point to 62 percent during the week.

Mortgage applications for new purchases, however, were up. The seasonally adjusted purchase index saw a one percent increase while the unadjusted index was down .4 percent from the week that ended on Aug. 9. According to the data, the unadjusted purchase index was 5 percent higher than it was during the same week a year ago.

The report also indicates that both contract and effective rates increased during the week. Reports show most of the contract rates were up by double digits. The contract rate for 30-year fixed mortgages, which had conforming balances of $417,000 or less, rose 12 base points to 4.68 percent. Points increased from .39 to .42. The contract rate for the Jumbo 30-year term mortgages with balances over that amount rose from 4.57 percent to 4.74 percent. In the meantime, the 15-year FRM had an average rate of 3.71 percent, which was up from 3.60 percent.

After seeing increases in rates that took the average rate from 4.5 percent to the 4.75 percent range, rates were down some on Wednesday. For best execution, the national average rates were as follows:   The 30-year note had dropped .04 percent to 4.71 percent. The 15-year note saw a decrease of .03 percent to 3.81 percent. The FHA 30-year note dropped .04 percent to 4.37 percent. The Jumbo 30-year note saw an improvement of .03 percent to 4.72 percent. The 5/1 ARM saw a .01 percent improvement to settle at 3.29 percent.

Everyone is anxiously awaiting the Wednesday afternoon release of the minutes from the August meeting of the Federal Reserve. Experts are in hopes that the minutes will provide more details as to when the actual scaling back of the bond buying program will begin. The Federal Reserve has been buying $85 billion in bonds monthly in an effort to keep the interest rates down. When the economic situation seems to be improving, the stimulus program will be scaled back and the end result will be higher interest rates.

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About the author

Rob is a analyst and reporter covering stocks and business news.