Refi Cooling, but Fed Succeeded in Inducing Wave

Given the dramatic increase in yields recently, including mortgage rates, it is worth looking a bit closer than usual at the weekly mortgage application figures released earlier today.

Mortgage applications have slipped for three weeks now. The 7.2% decline in the recent week continues to pattern of weakness concentrated in the refi markets. Those applications fell 11.6% during the most recent week.

The success of the Fed's efforts to help encourage mortgage relief is evident that refis are running at levels more than 60% above year ago levels. In contrast, the application for purchase index is off 27.5% from year ago levels.

The average rate of 30-year fixed rate mortgages rose 32 bp to 5.57% last week. A year ago the rate stood at 6.24%. The rate on 1-year adjustable rate mortages rose 14 bp last week to 6.75%, which is 2 bp higher than a year ago.

The Federal Reserve continues to support the mortgage-backed securities market and Agency bonds. Comments from most Fed officials seem to suggest they are carefully monitoring the increase in rates, but currently still favors relatively benign interpretations, such as improved financial conditions, stabilization of economic data. Bernanke, last week, did acknowledge, some supply concerns as well, but did not seem to place extra emphasis on that factor.
Refi Cooling, but Fed Succeeded in Inducing Wave Refi Cooling, but Fed Succeeded in Inducing Wave Reviewed by magonomics on June 10, 2009 Rating: 5
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