Increasing consumer sentiment spurred more refinances than home purchases
Consumer sentiment levels have been a more important predictor of mortgage application volume than fluctuations in mortgage interest rates have been over the last 12 months. The indexes for both consumer sentiment and for mortgage application activity have very closely mirrored each other between April 2014 and April 2015 according to the University of Michigan and RealtyTrac respectively. Both indexes retrenched during the first quarter of 2015, and both are up over the last 12 months — by very similar amounts both times.
Average mortgage interest rates have persistently fluctuated near all-time lows (between 3.35 – 4.34 percent) since August 2011. That infers that low interest rates were a precondition of increased mortgage application activity but not their specific cause.
Interestingly the increase has mostly gone to refinance applications instead of to purchase applications. That implies that current levels of consumer sentiment are high enough for people to think that the closing costs associated with a refinance are a worthwhile investment, but that they are not yet high enough to cause a robust spring home buying season.
Potential refinancers will find conforming no point 30-year fixed mortgage rates average 3.875 percent while 15-year rates average 3.125 percent.
For more information on a home purchase, refinance, or a reverse mortgage, visit our website at Aramco.Biz or call me at (877) 700-0942. This is Mehran Aram with today's ARAMCO Report.