Financial markets provide numerous reports. Stocks and bonds in particular are subjected to countless types of reports. The reports help analysts understand the current state of the economy but also provide a glimpse in to the future of rates. Based on the recent information it would seem that rates may rise throughout the year 2013 but overall rates will remain below 6%.
Decrease in Purchase Applications
Most of the time the mortgage market moves slowly, leading to a slow response from the general public. However, the month of May saw a significant change. On May 1st the typical rate for a 30 year mortgage was 3.35% across the country. By the time May 31st rolled around the rate had jumped to 3.81%. The market has not seen such an increase since the summer of 2009.
For this reason a number of people stopped looking for a home. The MBA (Mortgage Bankers Association) reported a decrease in home purchase applications by 20%.
Surge in Refinances
While purchase transactions may have taken a hit, refinances have grown in number. The number of people applying for a refinance was twice as high as the number of people applying for a purchase. The people that had waited to see if the rates could go lower finally jumped in and chose to refinance their home.
HARP is a Strong Player in Refinancing
Since its introduction 3 years ago, the Home Affordable Refinance Program has been a main player in the refinance of thousands of homes. Also called HARP, this refinance loan allows borrowers the opportunity to get a better interest on their current mortgage even if the balance on the loan is more than the home’s current worth.
Since it was first brought to market the program has been changed once to remove any maximum Loan to Value amounts. This modification tripled the number of people that applied for the loan.
Based on the steady climb in property values it is a safe bet that mortgage rates will continue to rise. Whether that rise is sudden or gradual remains to be seen. However, it behooves those homeowners that are still waiting to go ahead and call their lender while they still have time to take advantage of these great interest rates.