With any luck, homeowners closed out 2015 with celebration and good cheer, as is customary during the holiday season. And unsurprisingly, given the hectic nature of the period, there was a precipitous dropoff in mortgage activity, as celebrants appeared to have spent more time enjoying their current homes rather than applying for their next humble abode, newly released numbers suggest.
Mortgage applications fell more than 25 percent during the week ending Jan. 1 from two weeks earlier, according to the most recent statistics published by the Mortgage Bankers Association. This includes the adjustment for the Christmas holiday, which naturally tends to see lesser amounts of activity.
Mortgage loan volume also slid by double-digits. The Market Composite Index slipped 27 percent on a seasonally adjusted basis from 14 days prior, MBA reported.
Following the same theme, fewer people refinanced their mortgages in the final days of 2015. Refinancing comprised approximately 55 percent of overall applications, MBA reported, down slightly from 56 percent seven days before. Typically the refinance share is in the 60 percent to 70 percent range.
Though mortgage rates concluded 2015 in territory that it rarely reached in the previous 12 months – i.e. above 4 percent – they fell back to typical territory when 2016 ushered in. Freddie Mac's Primary Mortgage Market Survey for the week concluding Jan. 7 saw 30-year fixed-rate mortgages drop back below 4 percent to 3.9 percent. Versus the same period last year, 30-year FRMs were at 3.7 percent.
Sean Becketti, Freddie Mac chief economist, pointed to global economic uncertainty as the main reason for the slippage.
"Concerns about overseas economic developments have dominated financial markets to start the year," Becketti explained. "U.S. Treasury bond yields fell amidst a global equity selloff and flight to safety. In response, the 30-year mortgage rate dipped 4 basis points to 3.97 percent."
Some speculate that mortgage rates could reach 4.5 to 5 percent territory in the latter stages of 2016. This belief stems from the Federal Reserve's forecast that it intends to raise short-term interest rates on several occasions.
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