How Are Rising Rates Impacting The Market Thus Far?

*How Are Rising Rates Impacting The Market Thus Far?*
**New Data Emerges**

rates-rising***There’s been a lot of talk that rising interest rates are going to slow refinance activity, but is that really what’s happening? Some say that we’re in for a prolonged purchase market starting next year. Is that an accurate assumption? New data from Ellie Mae sheds some light on these predictions.

****According to the latest Ellie Mae Origination Insight Report, “in June, the mix of refinance-to-purchase loans continued to rebalance as higher rates made refinancing less attractive and the prospect of higher home prices and potentially higher interest rates may have brought more buyers to the closing table,” said Jonathan Corr, president and chief operating officer of Ellie Mae. “Closed purchase loans accounted for 49% of the volume in June 2013, the highest level since we began tracking in August 2011.

****The Ellie Mae Origination Insight Report provides monthly data and insights from a sampling of closed loan applications that flow through Ellie Mae’s Encompass360 mortgage management software and Ellie Mae Network. The characteristics of closed and denied loans presented in this report are averages.

****In 2012, the total volume of mortgages that ran through Ellie Mae’s Encompass360 mortgage management software was approximately three million loan applications, or 20% of all U.S. mortgage originations.

****The Origination Insight Report mines its application data from a sampling of approximately 44% of all mortgage applications that were initiated on the Encompass origination platform. Given the size of this sample and Ellie Mae’s market share, the company believes the Origination Insight Report is a strong proxy of the underwriting standards that are being employed by lenders across the country.

****What other findings could be seen in the latest report? “The average interest rate on a 30-year loan rose to 3.918% in June 2013, the highest point since June 2012 when it was 3.992%,” Corr noted. “The transition from a refinance to a purchase market may also be why we saw a growth in adjustable rate mortgages in June 2013, hitting 4% for the first time since May 2012. This may be a sign that some buyers are trying to stretch their budget as both home prices and interest rates tick up.”

****Finally, Corr noted, “HARP-related refinancing activity continued to cool with conventional refinances at 95%-plus LTV dropping from 9.40% in May 2013 to 8.00% in June 2013.”