Market Recap - New Purchases Up, Refinances Down, Solid Consumer Credit, and a Rate Hike Next Week
Mortgage rates inched downward this week, with no significant changes to report. According to the MBA, new purchase applications were up and refinances were down. Consumer credit expanded modestly. The Federal Open Market Committee is scheduled to meet next week, and an interest rate hike is all but guaranteed.
The MBA released mortgage purchase applications for the week ending on 12/2. The purchase index showed a 0.4% increase and refinances were down 1% for a composite index of -0.7%. This is a slight improvement from last week’s week-over-week change. Refinances are expected to stall as mortgage rates rise, while new purchase applications typically rise as borrowers attempt to lock rates to avoid further rate increases.
Total consumer credit increased to $3.7 Trillion in October, posting a year-over-year growth rate of 5.1%. The $16 billion gain fell short of the $19.3 billion prediction. Consumer spending slowed to 0.3% after September increases of 0.7%. Credit growth is broken into non-revolving credit like loans for education and cars (excluding mortgages) and revolving credit like credit card loans. Non-revolving credit saw a 6% year-over-year increase and revolving credit grew at a 2.9% annual rate.
Fed officials suggested they might make their super-sized balance sheet of bond holdings and $2 trillion in excess reserves a more permanent feature of the way they interact with financial markets. This decision would greatly influence the way the central bank manages short-term policy. A rate hike next week is all but guaranteed.
New purchase applications are on the rise and refinances are down, which is typical when interest rates start to rise. New buyers are looking to lock rates and owners who wish to refinance are holding off until rates settle down. Job growth, consumer credit, and other economic activity has been strong and the FOMC is expected to raise rates next week.
Sources: Bloomberg, Mortgage News Daily, MarketWatch, HousingWire