Mortgage application volume continued to suffer throughout August as interest rates increased, but analysts at ""Capital Economics"":https://www.capitaleconomics.com/ note bigger factors at play may aid lending in the near future.
[IMAGE]In a US Housing Data Response, property economist Paul Diggle--using data from the ""Mortgage Bankers Association"":http://mbaa.org/default.htm (MBA)--noted total application volume fell 11.1 percent from July to August as the 30-year fixed mortgage rate reached an average of 4.66 percent, the highest level in more than two years.
Again, refinances took the biggest hit, giving up 13.7 percent month-over-month to drop a cumulative 55 percent from their peak. Though applications for home [COLUMN_BREAK]
purchase also declined, the drop was less dramatic: 6.4 percent. According to Diggle, purchase application volume is now 12.6 percent below its level prior to recent rate movements.
Though applications fell in August as whole, MBA's data for the final week actually shows an increase of 1.3 percent as the 30-year rate fell to an average 4.73 percent. MBA's weekly Refinance Index increased 2 percent week-over-week, while the seasonally adjusted Purchase Index was down 0.4 percent.
While mortgage rates are expected to remain volatile as the country waits for the Federal Reserve to being tapering its asset purchases, Diggle believes any increases from this point should be ""much more modest.""
""After all, tapering is not the same as tightening, and the Fed is unlikely to begin raising interest rates until the first half of 2015,"" he said.
More important, he added, is the recent release of new proposals for the ""qualified residential mortgage"":https://themreport.com/articles/regulators-propose-relaxed-qrm-requirements-2013-08-28 (QRM) rule, which relaxed loan standards for banks to be exempt from retaining risk on mortgage-backed securities.
""The bigger picture is that the availability of mortgage credit, rather than the cost, is the main factor holding back lending volumes,"" he explained. ""Up until now, uncertainty about the final form of the rule has been one factor behind tight credit conditions.""