Mortgage applications rebound 21%: Here’s why

A sharp drop in mortgage activity over the holidays was clearly temporary. Mortgage application volume increased 21.3 percent last week versus the previous week on a seasonally adjusted basis, according to the Mortgage Bankers Association.

The previous week’s reading were adjusted for the New Year’s holiday. Mortgage applications were on a roller coaster in December, as some borrows rushed in early in the month to get ahead of a possible Fed rate hike.

“The good news for the new year is that following the holidays, application activity last week resumed at levels just exceeding those observed during early December, suggesting that the purchase market has picked up right where it left off,” said Lynn Fisher, MBA’s vice president of research and economics.

Mortgage applications to purchase a home increased 18 percent from the previous week, seasonally adjusted, and were 19 percent higher than the same week one year ago. This signals an increase in potential home buying at the start of the year. New listings usually begin to increase just after the holidays.

“MBA’s purchase mortgage application index reached its second highest level since May 2010 on a seasonally adjusted basis last week, second only to the week prior to the implementation of the Know Before You Owe rules,” Fisher said.

Those new rules, designed to protect borrowers, have been blamed for delays in closings. Some claim they caused the steep drop in closed sales in November. Borrowers had been warned about the new rules, which went into effect in October, which is why there may have been a rush on loan applications just before they went into effect.