Mortgage applications continue to adjust to changing views of interest rates and home prices. Applications for mortgages for purchasing a home peaked at the beginning of May as talk of rising interest rates appeared and are now down almost 15% as of October 4th. Even with that decline, the Mortgage Bankers Association index of applications for purchase mortgages is 11% above the level at the end of 2012. The bigger move is in mortgages for refinancing – this is not a surprise since interest rate sensitivity is likely to be greatest among refinancing. The index of mortgages for refinancing most recent peak was at the end of September 2012 — the previous peak was in 2009. Since last September the index is down 66%. Over the same time period the share of applications that are for refinancing dropped from 83% to 64%. The other shift, also related to interest rates, is an increase in the use of adjustable rate mortgages rather than fixed rate loans; from a low of 2.9% adjustable rate loans at the end of 2012 the share touched 7% at the beginning of September.
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