Mortgage Apps: Third Week of Increases

Bottom Line:    Mortgage applications rose for the third week, despite historically high mortgage rates. The slight increase was driven by applications for refinancing, which remain historically very depressed, with the vast majority of mortgage borrowers enjoying rates some 250+ basis points below current rates. Purchase applications were unchanged after starting to rebound in mid-June, but the trend remains to the downside. Mortgage bankers are overstaffed, with several lenders announcing layoffs, and there appears to be some last-ditch effort to push through any applications they can. Bankers have pushed 5/1 ARMs (5-year fixed-rate, floating annually thereafter for 25 years) to make payments affordable (the 5-year fixed portion last week was over 140bps below the 30-year rate). Overall, we are keeping a close eye on the uptick in applications, but so far, the recent increase looks anomalous rather than any significant shift in the trend.