As mortgage rates fall, applications tick up

We learned this week that mortgage applications rose almost 3% last week, compared to the week before. That’s according to the Mortgage Bankers Association.

Refinance activity rose, too. Part of this is because home prices have been leveling off. But the real culprit is falling mortgage rates.

Throughout the last few months, the number of people applying for mortgages has reflected whether mortgages were more or less expensive.

“January picked up a bit, as rates dropped,” said Mike Fratantoni, chief economist at the Mortgage Bankers Association. “February, rates picked up, activity fell off again. March is looking a lot better.”

Mortgage application volume is still over 30% lower than it was at this time last year.

But Fratantoni said the recent increase shows that buyers are eager to pounce.

“Even with rates coming back down from a peak of seven-plus percent in October of last year, to the low sixes, that has brought a lot of buyers back into the market,” he said.

Part of what’s been preventing people from buying homes is that a lot of buyers don’t qualify for mortgages since rates have nearly doubled since the start of last year.

“Not that they didn’t want to buy — in fact, they may be renting right now, and paying more in rent,” said Susan Wachter, a professor of real estate at the Wharton School. “They would like to buy, but they simply don’t qualify for a mortgage.”

And every time rates tick down, Wachter says tens of thousands of people become eligible to apply.