Is there a correlation between mortgage rates and loan application activity?
The answer: there probably is but, it depends too, on other factors.
When rates were at their lows in December of 2012 and January 2013 applications were strong and hitting highs. But that happened again in February and March even with higher rates. The spring buying market had started with the perception being the housing market had healed itself and would come back strongly this year.
Rates jumped further and things cooled until the third week in March when applications jumped again. Rates were still holding at a higher level. When rates slid going into April, application activity jumped into positive territory.
Once we reached May, things began to change in earnest. As rates rates bounced off the bottom there was a surge in applications. This is typically one of the busiest home buying periods of the spring. This particular situation could also be described as buyers “jumping off the fence” as they realize this may be a bottom for rates.
As rates continued to surge in the face of a bond market panic loan applications dropped precipitously into the first week of June. We had one additional period of growth in loan apps but then another down comparison.
What will we see going forward? I intend to discuss that in the next article where anecdotal stories may paint a picture for our future.