US Mortgage Applications for the week ended June 19 climbed 6.6% following four weeks of contraction in the market index. Filings for purchases of new homes came in at a 7.3% gain while refinancing grew 5.9%, the first gain for the sector in five weeks. The improvements seen can largely be attributed to further declines in mortgage rates from recent highs achieved two weeks ago. The 30-year fixed rate mortgage fell to 5.44% from 5.50% in the previous week. Meanwhile, the 15-year rate cooled for the second week to 4.93%, well below the recent top at 5.10%. The rate on mortgage loans tends to track government Treasury yields which have come down in recent weeks. The 10-year bond traded with a yield above four percent on June 10 but has since pulled back to approximately 3.66% today. Going forward, mortgage rates still have a way to go before catching the upside seen in Treasuries. Since early March, the relationship has seen a divergence as the Federal Reserve announced quantative easing measures in the form of purchasing $300 billion of government securities. The FOMC decision today could expand on that program as rates have risen sharply in the past several weeks however economists do not expect the Fed to make large sweeping changes.
Graph of 10-year Treasury Bond Yield and MBA 30-year Fixed-Rate Mortgage Yield