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Mortgage rates keep falling ahead of spring shopping season

Over the past few weeks, those paying close attention to the mortgage market have likely noticed a bit of a shift in trends. Where mortgage rates had been ticking up slowly but surely for about five months, they recently reversed course. However, those within the industry say that would-be shoppers – whether they seek to refinance existing mortgages or make a home purchase – shouldn't expect that trend to hold for much longer.

Indeed, the Federal Reserve Board recently reaffirmed its commitment to scaling back its support of the mortgage market – seen through its years of bond-buying efforts – at some point later in 2017, and that will cause rates to rise, according to Bankrate. So while rates have been falling for a few weeks now, and are now approaching a low not seen since the end of last year, any decisions from the Fed to switch up its policies would likely lead to somewhat rapid rate inflation.

Buyers getting a move on
The good news for shoppers in general is that they're now moving into the market in greater numbers, which will allow them to lock in both relatively low rates and home prices before the spring spike in activity, and its accompanying increase in prices, according to the latest Weekly Mortgage Applications Survey from the Mortgage Bankers Association. While the number of applications filed in the week ending March 31 dropped 1.6 percent, that was driven entirely by a 4 percent decline in refinance activity.

The number of people seeking a mortgage for the purposes of buying a home actually rose 1 percent on a weekly basis, and 8 percent year-over-year, the WMAS showed. As a consequence of these changes, the share of the mortgage market taken up by refinances slipped to just 42.6 percent, down from 44 percent. Unfortunately for buyers, the average loan size sought on purchase mortgage applications in the week ending March 31 rose to an all-time high of about $318,200.

Lenders making it easier to buy
Meanwhile, the decline in refinance activity has financial institutions nationwide casting a more forgiving eye to would-be buyers, indicated by mortgage access ticking up significantly in March, according to the latest Mortgage Credit Availability Index from the MBA. Overall, the MCAI rose 3.2 percent to a reading of 183.4, against a benchmark of 100 set in March 2012. This increase was mostly driven by growing access to jumbo loans – those extended to affluent buyers seeking expensive homes – but there were also increases in the MCAI for conventional and government-backed mortgages as well.

With all these conditions in mind, the time is now for shoppers to get into the market. Once the spring buying season begins in earnest, prices are only likely to rise more sharply than they already have, and mortgage rates could follow suit when the Fed scales back its bond-buying. As such, the sooner buyers can start the purchase process, the more affordable their loans will be.

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