THEYRE BACK

Dated: 06/18/2015

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The highest interest rates of the year continue to take their toll on mortgage business, but they are breathing new life into mortgage products that were more popular during the last housing boom. Total mortgage application volume fell 5.5 percent on a seasonally adjusted basis from one week earlier for the week ending June 12, according to the Mortgage Bankers Association (MBA). "Rising rates continue to create volatility in weekly mortgage applications activity," noted Michael Fratantoni, the MBA's chief economist.Applications to refinance, which are most interest rate-sensitive, fell seven percent from the previous week, seasonally adjusted. Applications to purchase a home were off 4 percent for the week, but are still 15 percent higher than one year ago. This comes as the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 4.22 percent from 4.17 percent, with points increasing to 0.46 from 0.38 (including the origination fee) for 80 percent loan-to-value ratio loans. That is the highest rate since October, 2014. "Lenders who have focused on the purchase market are benefiting in this environment," noted Fratantoni. As often happens when rates rise, borrowers look for lower-cost products, such as adjustable rate mortgages (ARMs). These offer lower rates, but higher risk. They were very popular during the housing boom years, and some blame the most risky types for causing the crash. ARM volume decreased dramatically during the foreclosure crisis, as lenders tightened standards, and borrowers fled to the safety of fixed-rate loans. The adjustable-rate mortgage share of activity increased to 6.5 percent of total applications last week, with an average rate of 3.15 percent for a five-year ARM. "Historically, borrowers moved to ARMs to increase their purchasing power, but that approach is less impactful today given the tighter regulatory constraints associated with ARM lending," added Fratantoni. Diana OlickCNBC Real Estate Reporter

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Michael Krivacs

I grew up in Beach Haven on Long Beach Island and graduated from The American University with a BS in Business Administration. While in college I met my wife Holly. After school I worked as a Wage ....

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