Despite mortgage rates rising over the last couple of weeks, applications for loans has risen!

Despite mortgage rates rising over the last couple of weeks, applications for loans has risen.

Investors are loving the latest news from the Fed regarding interest rates.  This week there was tons of speculation on whether the FOMC minutes released on Wednesday afternoon would have different wording in them regarding the Fed’s plan for the future of interest rates.

Many experts believe that the stock market has been steadily rising to new records because business loves borrowing money at low rates.  It makes it easier for companies to turn profits which is what investors want.  Concern this week was that the Fed might change their language towards when they might increase rates since the economy has been doing better.

Well…the Fed held steady with the course and plan for interest rates and they believe that increases will not occur until the summer of 2015.  At that time increases are expected to be very gradual in nature as to not disrupt economic growth.  This is the news that markets were hoping for and they got it!  The Dow Jones Industrial Average has risen 284 points for the first 4 days of the week.

Mortgage rates on the Fed news, have risen to their highest point in 4 months.  As investors feel more confident in the future of the stock market, this will continue to drive money out of government bonds and into the stock market.  This shift in where investors place their money causes bond yields and mortgage backed securities to rise which mortgage rates are based upon.

Despite mortgage rates rising over the last couple of weeks, applications for loans has risen.  The Mortgage Bankers Association of American reported that applications for purchases and refinances jumped 5.0 percent and 10.0 percent respectively.

It appears that homebuilders are being a little cautious about the future of housing as indicated by August’s housing starts and permits.  Starts on new home construction declined 14.4 percent which is in stark contrast to July’s jump of 22.9 percent.  Permits for new construction declined 5.6 percent after a rise of 8.6 percent in the prior month.  The multifamily component made up the majority of the decline in the latest data which means that single family construction has not contracted significantly.

In other news, inflation continues to be a non-factor which is one of the reasons the Fed has elected to keep interest rates where they are.  For the longest time the Fed has indicated that if inflation shows a pattern of rising, they might need to change their interest rate policy sooner than expected.

First time jobless claims came in much lower than expected.  At 280,000 for the week ending September 18^th, this number is far below anyone’s expectations and shows an improving labor market.

JJ Mack
JJ.Mack@apmortgage.com
916-517-1800 x 300
www.apmcroseville.com