Us mortgage applications surge at start of 2016

Photo credit: Cyndie

US mortgage applications surged at the start of 2016, as employment levels continue to improve.

Mortgage applications increased 21.3 per cent in the week ending 8th January from one week earlier, according to data from the Mortgage Bankers Association.

The growth arrived as the country adjusts to the Federal Reserve's decision to raise interest rates in December 2015. Contrary to popular belief, though, the Fed does not determine mortgage rates, although it can have an effect upon them. Indeed, the average contract interest rate for 30-year fixed-rate mortgages decreased to 4.12 per cent from 4.20 per cent in January, while the average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.90 per cent from 3.95 per cent. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.42 per cent from 3.47 per cent.

Buyers were quick to take advantage of the still-low rates, with MBA's purchase mortgage application index reaching its second highest level since May 2010 on a seasonally adjusted basis.

"Bolstered by strong fourth quarter growth in jobs and continuing low rates, the results are similar to levels we saw in early December, suggesting that the purchase market's strong finish to 2015 may be continuing," says Lynn Fisher, MBA's Vice President of Research and Economics. "While refinances also increased on a holiday-adjusted basis, refinance activity was down 38 per cent relative to a year ago when rates dove below 4 per cent.