Rising Rates Unlikely to Affect Purchase Mortgages

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CoreLogic’s monthly Market Pulse Molly Boesel looks at the influence interest rates, which have risen by a little over 100 basis points from May to August, may have on mortgage refinancing. Her article “Rising Rates Cooling Refinance Activity” notes that the recent increase was the largest rise in the 30-year rate since mid-2004. What, she asks, will happen to the mortgage market?

That market, she says, is made up of two distinct parts, the home purchase market which is driven by sales and the refinancing market which is driven by rates. In addition to sales the dollar amount of purchase originations is influenced by home prices, loan-to-value ratios, and the share of purchases that use a mortgage. In the go-go days before the crash all of theses were in high gear producing record high numbers of sales, easy access to credit, and soaring home prices. The economy was also sailing and interest rates were hovering around 6 percent. Then it ended and we had a five-year stretch of low purchase origination volumes.

Read the full report here.