By Kevin Chiu
Applications for home mortgages climbed last week as interest rates moved slightly higher on finalized contracts, according to the Mortgage Bankers Association. Refinances grew a modest 1.3%, while purchase money applications also rose a smaller 1.1% across the U.S.
The increase was driven by government loan applications, especially for FHA mortgages that require lower down payments for home financing. Government refinances grew by 9.9%, while conventional refinancing saw a climb of only two-tenths of one-percent. The 30-year conventional fixed rate fully executed mortgage averaged 4.25%, a seven basis point climb over a week earlier.
Mortgage rates on 30-year fixed rate government backed FHA loans were much lower averaging 4.06%, a modest climb of one basis point from the prior week on 80% loan-to-value mortgages.
The average contracted rate on a 15-year fixed rate loan rose to 3.53%, a four basis-point jump from a week earlier. Shorter term conventional mortgages like the 15-year are gaining in popularity as homeowners seek shorter loan periods to pay-off their home mortgages.
Bankers said the increase prodded more homeowners to get off the fence and apply for refinancing after mortgage rates hit their record historic low a week ago. The drop in rates hasn’t yet materialized in a run on refinancing, despite the lowest mortgage rates on record.
The average loan size for home purchases was $210,863 in September, a slight drop from $212,736 the prior month. Refinance amounts were a bit higher, averaging $237,632 during September, but stayed well under the maximum loan limit for traditional mortgage lending guidelines.
The government stopped buying jumbo mortgages Oct.1st, limiting homeowners’ access to cheaper mortgage financing as part of changes adopted due to Dodd-Frank financial reform legislation. The average contracted rate on a 15-year fixed rate loan rose to 3.53%, a four basis-point jump from a week earlier.