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US Mortgage Applications Rise Sharply

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US Mortgage Applications Rise Sharply

The Mortgage Bankers Association has just released this week’s MBA Mortgage Application figures, the current reading is 5.3% which represents a turnaround on last week’s -5.9% figure.

The US housing market has so far been a particularly reluctant participant in this stage of the economic recovery. This gap has become increasingly evident over the last two quarters.

Several factors are at play that are holding back the recovery in the housing market. Most by their nature will pass in time and a pick up in this sector can be anticipated for later in the year, if not sooner.

The harsh winter, specifically in the early months of this year dampened much of the US economy and the housing markets did not escape this phenomena. The weather related slowdown in the broad economy has reversed over the past couple of months and as would be expected the release of pent up demand has created above average growth in many areas. The housing market is likely to also experience this initial over compensation albeit with some lag due to the large ticket price of home buying.

Rising mortgage interest rates have done nothing to help housing market demand. Rates are being recorded up to 1% higher now than a year ago. Experience shows however that although moderate mortgage rate increases do influence demand, their effects tend to wear off over the course of several quarters. This would suggest that the dampening effects of the early part of the current rate rise cycle should now begin to dissipate and demand should start returning to pre rate rise levels.

The most challenging aspect that the US housing market has to overcome however is not financially driven. The tightening of lending standards is being cited by many as the reason for a low success rate in mortgage applications. These tight standards are a natural over reaction to the causes of the economic crises, it is hoped however that competition over time will lead to a normalization of lending standards and a more free mortgage lending market.

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