Following an imbalance in data last week, mortgage rates hit a new low for the year, and borrowers took advantage of this with an uptick in mortgage applications this week.
According to the report, for the week ending May 12, 2016, the 30-year fixed-rate mortgage (FRM) averaged 3.57 percent with an average 0.5 point. Last week, it averaged 3.61 percent and a year ago at this time, the 30-year FRM averaged 3.85 percent.
Sean Becketti, Chief Economist, Freddie Mac said, "Disappointing April employment data once again kept a lid on Treasury yields, which have struggled to stay above 1.8 percent since late March. As a result, the 30-year mortgage rate fell four basis points to 3.57 percent, a new low for 2016 and the lowest mark in three years. Prospective homebuyers will continue to take advantage of a falling rate environment that has seen mortgage rates drop in 14 of the previous 19 weeks."
Freddie Mac also found that the 15-year FRM averaged 2.81 percent this week with an average 0.5 point, down from last week when it averaged 2.86 percent. The 15-year FRM averaged 3.07 percent a year ago at this time.
The report also showed that the 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.78 percent this week with an average 0.5 point, down from last week when it averaged 2.80 percent.
Low mortgage rates are bound to bring out homebuyers, and that is just what they did.
The Mortgage Bankers Association (MBA) reported in its Weekly Mortgage Applications Survey that for the week ending May 6, 2016, the Market Composite Index, or mortgage loan application volume, increased 0.4 percent on a seasonally adjusted basis from one week earlier.
The Index increased 1 percent on an unadjusted basis, compared with the previous week. Meanwhile, the MBA reported that its Refinance Index increased 0.5 percent from the previous week. The seasonally adjusted Purchase Index increased 0.4 percent from one week earlier, while the unadjusted Purchase Index increased 1 percent compared with the previous week and was 14 percent higher than the same week one year ago.
The MBA found that the refinance share of mortgage activity decreased to 52.8 percent of total applications from 52.9 percent last week.
Credit tightening and low supply in the housing market did not seem to affect the mortgage rate and application data this week, as they both moved in sync this week. Now the question is: What will happen next week?