Blog posted On May 11, 2018
Mortgage rates trended slightly upward this week and then leveled off. Consumer credit expanded more slowly than in recent months, suggesting consumers have enough assets and saving to offset borrowing. Job openings exceeded expectations, and hirings dropped. The weekly mortgage application survey decreased, driven mostly by a drop in refinance application submissions.
The consumer credit report measures total outstanding consumer debt segmented by revolving and nonrevolving debt. Revolving debt includes monthly debt like credit card bills and nonrevolving credit includes longer term debt like student loans and auto loans, but excludes mortgage debt. In March, consumer borrowing slowed, up a slight 3.6% to $11.6 billion, well below the $15.6 billion expectation. Nonrevolving credit increased at a rate of 6%, the third straight month of growth. Revolving credit, however, declined, down 3%, the second consecutive month of declines. Economists interviewed by MarketWatch explained loan growth has fallen to historically low levels, and this decline might mean that households are better capitalized and do not need to borrow as much.
The Labor Department’s Job Openings and Labor Turnover Survey (JOLTS) hit a record high in March, nearing the 6.6 million mark, up by 472,000 jobs from February to March. The quit rate also increased, up 136,000 to a level of 3.34 million, a sign of worker confidence. Hiring dipped slightly, down to a level of 5.42 million. The national unemployment rate recently hit a new record low, falling to a level of 3.9%. The excess of job openings compared to hiring suggests that there are more open positions than there are workers available. Employers are struggling to fill job openings.
The Mortgage Bankers Association (MBA) weekly mortgage application survey dropped 0.4% for the week ending 5/4. Although average mortgage rates have started to level off, refinance activity is expected to continue contracting, as most homeowners interested in refinance have already secured their lower rate. Refinance application submissions fell 1.0% and new purchase application submissions edged a slight 0.2% lower. MBA economist Joel Kan did not attribute the drop to mortgage rates explaining, “mortgage rates dipped slightly last week driven mainly by concerns about global growth.”
This spring home buying and selling season has been especially heated, with many sellers receiving multiple concurrent offers on their homes. With rates expected to continue to climb, buyers interested in moving are making their real estate moves now. One way to stay competitive is to get preapproved for mortgage financing before shopping for a home. With mortgage preapproval, sellers know you are serious and will likely be able to secure mortgage financing when your offer is accepted.