Mortgage Applications Drop as Fed Decision Looms
People are on the fence about taking out a mortgage as the Fed gets ready to make a decision on interest rates. Despite an adjustment for Labor Day, mortgage applications went down by 7% last week, the Mortgage Bankers Association says. The drop is odd because mortgage rates don't follow Fed rates, they follow bond yields, although the latter can be affected by the Fed.
The average contract interest rate for a 30-year fixed-rate mortgage decreased 0.01% during the same time. And although new home purchase applications saw a drop of 4.2%—not very rate-sensitive—home sales, by volume, have been declining over the past month.
While lenders may temporarily raise rates, Auction.com EVP Rick Sharga says, they'll probably lower them again "in a repeat performance of what we saw when the Fed announced it was ending the QE (Quantitive Easing) Program." So rates will increase by a point and home sales will slow down for a little bit before stabilizing. Despite this, mortgage rates are actually quite low by historical standards. [CNBC]