Mortgage Refinancing Trend is Dying Down
The day after Fourth of July 2013 saw the biggest single-day increase to mortgage rates in the U.S. in the last ten years. Mortgage rate averages jumped almost an entire point on that one day, from around 3.8% to a thick and cumbersome 4.75%.
So what could have possibly happened to create such volatility? Well, it seems like these days positive signs are too good to be true: On the 5th the Bureau of Labor Statistics announced that the last month had seen $195,000 new jobs created, the third highest amount in a single month over the last 15 years. In fact, jobs have been on the rise for the last couple months, and the Bureau's monthly report is one of the key barometers the Federal Reserve uses to gauge the ebbs and flows of the economy.
After three strong months of job growth, the Fed decided it was time to take the training wheels off, and started withdrawing their support of the economy through the purchase of bonds. This move by the Federal Reserve is what caused mortgage rates to skyrocket.
Despite the meteoric one-day jump, the mortgage interest rates have actually been on the rise since late May. What this has done is put a damper on mortgage applications, which have dropped by an average of 1.2% every week for the last 5 weeks. This equals a total downturn of 44% fewer mortgage applications over the course of the year.
All this information puts added downward pressure on the mortgage refinance market. With so much uncertainty in mortgage rates, people who are considering refinancing their loan would rather hold off to see if they dip back down. As it turns out, mortgage refinancing applications have already dropped by 50%.
In reaction to these trends, both Wells Fargo Bank and Citigroup have laid off hundreds of their mortgage division employees.
By: Javi Calderon
