Rates are down but so are applications

Average mortgage rates have declined for the five of the past six weeks and a 30-year FRM averaged 4.52% (average 0.5 point) in the week leading up to the July 4 holiday, down from 4.55% a week earlier.

But despite the lower trend for rates, applications remain subdued.

Freddie Mac’s Primary Mortgage Market Survey shows that the average rate for a 15-year FRM was down to 3.99% (average 0.4 point) from 4.04% a week earlier.

5-year ARMs averaged 3.74% (average 0.3 point), down from 3.87% a week earlier.

“The run-up in mortgage rates earlier this year represented not just a rise in risk-free borrowing costs, but for investors, the mortgage spread also rose back to more normal levels by about 20 basis points,” noted Sam Khater, Freddie Mac’s chief economist. “What that means for buyers is good news. Mortgage rates may have a little more room to decline over the very short term.”

Khater believes the housing market should have more room to grow as millennials are reaching their peak age to buy a home.

Applications declined last week
While mortgage rates are moving lower, applications are also declining according to data from the Mortgage Bankers Association.

Its Weekly Mortgage Applications Survey for week ending June 29 shows a 0.5% decline for the Market Composite Index compared to a week earlier.

Unadjusted, the Index decreased 1% compared with the previous week; the Refinance Index decreased 2%; the seasonally adjusted Purchase Index increased 1%; the unadjusted Purchase Index remained unchanged from the previous week and was 1% lower than the same week one year ago.

The refinance share of mortgage activity decreased to 37.2% of total applications (from 37.6% a week earlier) while the adjustable-rate mortgage share of activity increased to 6.7% of total applications.

The FHA share of total applications remained unchanged at 10.2%; the VA share remained unchanged at 10.7%; and the USDA share of total was unchanged at 0.8%.