Mortgage applications drop amid sharp jump in rates

A year ago, the 5-year ARM averaged 3.02 percent.- 1-year Treasury-indexed ARM averaged 2.65 percent this week with an average 0.2 point, up from 2.62 percent last week.

Home sellers are optimistic but the real estate market is approaching “normalcy”, according to a new survey conducted by Redfin.

Refinance applications, which are highly rate-sensitive, fell 2 percent from the previous week, seasonally adjusted, but are 4 percent higher than one year ago, when rates were slightly lower. The rate on 15-year fixed-rate mortgages climbed to 3.20 per cent from 3.09 per cent.

While the Fed and many others only focus on the negative aspect of higher rates in terms of the affordability of buying a home, the focus should shift to what it means to home prices.

For every one percentage point increase in mortgage rates, a buyer’s maximum home purchase price falls by approximately 11 percent.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country at the beginning of each week. This past quarter of 2015, credit unions seem to be substituting traditional financial lending institutions such as commercial and investment banks in provision of home loans and mortgages.

Click to see today’s rates (Nov 12th, 2015)Freddie Mac: Mortgage Rates Leap To 3.98%. Freddie Mac’s own research team made a similar prediction earlier this week.

These numbers came from Freddie Mac’s “Economic and Housing Market Outlook” issued on October 26, 2015.

Attributed to Sean Becketti, chief economist, Freddie Mac.

Mortgage rates jumped sharply after a stronger than expected employment report all but cemented the idea of a December interest rate hike by the Federal Reserve.

It’s been a tough two weeks for mortgage rate shoppers.

With that being said, the general consensus among industry watchers is that mortgage rates will rise gradually between now and the end of 2015, followed by a slow-but-steady rise in 2016.

Disclaimers: This article contains third-party data that are deemed reliable but not guaranteed. Such statements are the equivalent of an educated guess and should not be viewed as facts. The Home Buying Institute makes no claims about future interest rates or mortgage trends.