Weekly mortgage applications fall; activity remains high
Mortgage application activity fell during the week ending July 5 compared to the previous week, although overall volume remained above levels seen at the same time last year. The Mortgage Bankers Association’s composite index of loan application volume was 2.4 percent lower than the previous week on a seasonally adjusted basis. However, refinance loan application volume was 88 percent higher than this time one year ago, and purchase loan applications were up 6 percent over the same period.
“Borrowers have been less sensitive to low rates as many borrowers have either recently refinanced or are likely waiting for rates to fall even further,” according to the MBA’s Joel Kan. Still, he added that purchase application activity was on track to continue year-over-year growth seen in the first half of 2019.
Mortgage rates remain steady on economic outlook
The going rate for the standard 30-year fixed-rate mortgage was essentially unchanged for the second week in a row, according to Freddie Mac’s Primary Mortgage Market Survey released July 11. At an average commitment rate of 3.75 percent, interest rates remain near three-year lows, tempered by economic data that hints at a global slowdown but relatively good prospects for the U.S.
“The recent stabilization in mortgage rates reflects modestly improving U.S. economic data and a more accommodative tone from the Federal Reserve to respond to the rising downside economic risk from trade tensions and soft global economic data,” Freddie Mac Chief Economist Sam Khater said. “On the housing front, the latest weekly purchase application data suggests homebuyer demand continues to rise, which is consistent with the slowly improving real estate data from the last two months.”
What to watch next week
Federal Reserve Chairman Jerome Powell gave an annually scheduled testimony to both chambers of Congress July 10-11, making remarks that many analysts interpreted as signalling an interest rate cut later this month.
In his prepared remarks, Powell told members of Congress that the Fed would “act as appropriate to sustain the expansion” and that concerns raised after its June policy meeting “continue to weigh on the U.S. economic outlook.” This still comes as somewhat of a surprise, considering recent news that U.S. hiring activity was strong in June and at least some trade tensions between the U.S. and China have cooled since then.
If the Fed lowered interest rates as expected later this month, it would most likely keep mortgage rates in check, although this expectation may already be priced into current rates.