Total Mortgage Loan Application Volume fell in last week, Short-term Fed Funds Rate will hold, Housing remains bright for US Economy

September 21, 2016

Wednesday – September 21

The Mortgage Bankers Association (MBA) reported on Wednesday that its Market Composite Index, a measure of total mortgage loan application volume, fell 7.3% in the latest week as mortgage rates edged higher. In addition, the refinance index declined 8%, while the purchase index decreased 9%. The MBA also said that the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) rose to 3.70% from 3.67%, with points increasing to 0.38 from 0.36 (including the origination fee) for 80% loan-to-value (LTV) ratio loans.

The two-day Federal Open Market Committee meeting concludes on Wednesday afternoon with the monetary policy statement being delivered at 2:00 p.m. ET. The consensus points to a “hawkish hold” where the Fed will maintain the short-term Fed Funds Rate at the 0.375% level, but may state that rates will rise in December. There is little chance of a hike at the November FOMC meeting given the presidential election. Weak economic data in the past month along with slow growth and subdued inflation should keep the Fed on hold today.

Freddie Mac released its monthly outlook for September showing that housing remains a bright spot for the U.S. economy. Freddie said that mortgage originations are expected to surge in the third quarter and its forecast for the best year in home sales since 2006 looks “increasingly on the mark.” Freddie is expecting the 30-year fixed rate to average 3.6% in 2016, the lowest annual average in 40 years. In addition, total mortgage originations are estimated to reach $2 trillion in 2016, the highest since 2012.