4/9/2015
By Jennifer Coombs

The Mortgage Bankers Association (MBA) noted that for the week ended April 3^rd there was a drop in home refinancing and a pop in home purchasing over the last week. The purchase index had been flat all year, but is now moving higher and fast as applications surged for the third week in a row, increasing by 7.0% over the prior week to the highest level since July 2013. Year-over-year, the purchasing index is up a very strong 12.0%. On the other hand, the home refinancing index fell by 3.0% in the past week although it has risen sharply over the last two years. Low interest rates were definitely a key factor which led to the pop in demand as the rate for the average 30-year mortgage for conforming loans (i.e. less than $417,000) dropped three basis points to 3.86%. This could most certainly imply that we’ll see a rise in home buying activity over the next few months.

Additionally, Tuesday afternoon’s consumer credit data released by the Federal Reserve was quite mixed. Overall consumer credit increased by a rather solid-looking $15.5 billion in February, but looking closer, the data shows an unwanted $3.7-billion declined in revolving credit. This marks the fourth decline in the last 5 months for the revolving component, and reflects the reluctance of the consumer to charge purchases on a credit card. The aversion to credit-card usage might be a plus for overall consumer wealth, but given the sky-high interest rates charged by credit card companies, this is a big negative for consumer spending. On the other hand, revolving credit increased by $19.2 billion which is the strongest gain since July 2011. This component is reflective of auto loans, but also reflective of the government’s ongoing and strong acquisition rate of student loan debt. The chart below shows the changes made to consumer credit since December 2013.

Jennifer Coombs
Wall Street Strategies

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