As they do every Wednesday, the Mortgage Bankers of America have released their mortgage application survey for the week ended May 20th. Overall loan demand was up by 1.1%, led by a positive reversal in the number of applications taken for purchase money mortgages. The purchase index was up 1.5% on a month-over-month basis while the refinance index posted a more modest gain of 0.9%.
The contract rate for 30-year fixed rate mortgages finished at 4.69%, up 0.9% points from a week ago, down 11 basis points from the month-ago mark, and down a matching 11 basis points from the year ago level. Refinance requests accounted for 6 out of every 10 applications taken during the week.
Domestic and foreign investor demand for longer-dated Treasury debt will be tested today as the government looks to sell $35 billion of 5-year notes at auction. Five-year offerings have been less than stellar performers at recent auctions. If demand is soft at today’s sale look for mortgage investors to use the weak demand as justification to nudge mortgage interest rates fractionally higher later this afternoon. On the other hand, should credit market participants show a strong appetite for these 5-year notes, mortgage interest rates will likely remain relatively steady for the day.
It is a close call, but I think both domestic and foreign investors are probably going to find it difficult to get too excited about aggressively bidding for an asset with a price drifting near its highest level since December. If my assessment proves accurate, it will be difficult, if not impossible, for mortgage rates to move notably lower from current levels through close of trading today. I’ll post the auction result on my website as soon as possible once the final gavel falls at 1:00 p.m. ET.
THE MARKET IS ALWAYS RIGHT! … YOU AND I ARE SOME OF THE TIME
