SerpApi.Org
Mortgage applications rose this week, driven by higher purchase activity, as higher rates failed to deter buyers.
For the week ending July 17, the Mortgage Bankers Association's Market Composite Index—a measure of total mortgage loan application volume—rose 1.9% on a seasonally adjusted basis from one week earlier.
The seasonally adjusted purchase index increased 6% from one week earlier, and purchase activity was up 0.2% year over year. Refinance activity dropped 2% on the week but was up 7% from a year earlier, when rates were even higher.
“Mortgage rates reached another high point last week,” says Mike Fratantoni, MBA’s SVP and Chief Economist. “However, purchase volume increased modestly for the week. Growing home inventory in many markets is supporting more purchase activity."
Mortgage rates have faced upward pressure since March due to the Iran war's impact on global oil prices, with each renewed outbreak of hostilities sending borrowing costs back up.
Last week, a fragile truce in the Iran conflict broke down, with the U.S. reimposing naval blockade and conducting sustained airstrikes as Iran targeted regional U.S. bases with missiles, killing multiple U.S. service members.
That has sent oil prices back up to their highest since early June, renewing the inflation threat that reared in the spring.
According to MBA's calculations, mortgage rates averaged 6.69% for the week ending July 17, hitting the highest level since last August.
Freddie Mac pegged rates at 6.55% as of July 16, also an 11-month high. New Freddie Mac data due out on Thursday is expected to show another increase.
"Incoming data showed that inflation dropped in June, but with oil prices spiking again, that improvement seems unlikely to continue in July data, and mortgage rates are likely to remain higher as a result,” says Fratantoni.
Mortgage rates calculated
Mortgage rates are calculated based on various factors in the economy, and the length of your loan and credit score will also factor into the mortgage rate you qualify for.
The 30-year mortgage rate is tied to the yield of the 10-year Treasury note, because most 30-year mortgages are either paid off or refinanced in roughly eight to 11 years.
That makes the duration on the loans roughly comparable, and mortgage lenders use the 10-year Treasury as a benchmark for setting rates, adding on a risk premium.
Long-term yields for Treasury notes are determined by a number of factors, including the supply of and demand for U.S. government debt, and investor expectations for inflation over the life of the bonds.
