Mortgage applications rise as rates decline

January 9th, 2014

Applications are up, a positive signal for the market

Mortgage applications in the United States increased during the week ending Jan. 3, according to the Mortgage Bankers Association, coming off a 13-year low. The industry group's seasonally adjusted index of mortgage application activity jumped to 345.1, an increase of 2.6 percent from the previous period. The index measures demand for both refinancing and new-home purchases.

This is a major improvement from earlier weeks. The data for the week ending Dec. 27 found that the index dropped 4.2 percent, hitting the lowest level since December 2000, Bloomberg reported. 

When looking solely at refinances, the MBA report still gives a positive outlook for the U.S. housing market. The index of refinancing applications fell to a five-year low in the week ending Dec. 27 but gained 4.6 percent in the week ending Jan. 3, Fox Business reported.

These results suggest that the housing market will continue to prosper despite the fact that the Federal Reserve recently announced it will begin tapering its stimulus. The announcement initially caused mortgage applications to fall, since word of tapering usually results in raised mortgage rates, but homebuying is back on the upswing.

Indeed, mortgage rates are holding fairly steady and have even dropped slightly. According to Freddie Mac, the average rate for a 30-year mortgage declined from 4.53 percent to 4.51 percent week over week Jan. 9.