Mortgage volume last week regained almost exactly what it lost the previous week, as interest rates stopped climbing and dipped slightly lower.
Total applications rose 4.6 percent on a seasonally adjusted basis for the week that ended Friday, which included an adjustment for the Independence Day holiday, according to the Mortgage Bankers Association. Mortgage application volume is now 22 percent higher than one year ago.
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Applications to refinance loans, which are most rate sensitive, increased 3 percent from the previous week, but applications to purchase properties grew a more robust 7 percent. Purchase applications are now 32 percent higher than a year ago.
The moves came as the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.23 percent from 4.26 percent, with points increasing to 0.37 from 0.33 (including the origination fee) for 80 percent loan-to-value ratio loans.
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"Overall, trends in mortgage applications last week were consistent with the ongoing shift towards a purchase market accompanied by growth in employment and higher interest rates. Although contract interest rates fell by 3 basis points due to economic uncertainty abroad last week, they remain 40 basis points above April levels and the refinance share of mortgage applications fell to 48 percent, the lowest rate since June of 2009," said Lynn Fisher, the association's vice president for research and economics.
Higher interest rates in general have energized the adjustable-rate-mortgage share of activity, which increased to 7.1 percent of total applications. ARMs offer lower interest rates, but higher risk for borrowers.
Interest rates took a brief dip Tuesday, as investors fled to the safety of the U.S. bond market, amid continued economic turmoil in Greece. By the end of the day, however, bond yields, which rates loosely follow, were regaining ground. Most lenders did not reprice rates lower, as there is simply too much volatility in the market. Wednesday's scheduled release of the minutes from the Federal Reserve's last meeting only adds to the uncertainty.
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"Volatility is the only safe bet," wrote Matthew Graham, chief operating officer of Mortgage News Daily. "For the past three business days, that volatility has generally left mortgage rates in better shape, but until we see a more stable change in market behavior, it's safer to treat such days as "lock opportunities" as opposed to promises of further improvement."