The Mortgage Refinancing Boom Is Evaporating Before Our Eyes

CHART OF THE DAY: The Mortgage Refinancing Boom Is Evaporating Before Our Eyes



Mortgage rates have been climbing for five straight weeks, and the latest data from the Mortgage Banker’s Association shows that the average 30-year fixed rate is now at 4.15%, up from 3.59% in the first week of May.

Meanwhile, the MBA’s refinancings index is down 36% from its peak at the beginning of May.

The rise in mortgage rates has been driven by concerns about when the Federal Reserve will begin to slow its $85-billion-a-month bond purchase program, which is designed to keep interest rates low. Those fears have sparked a sell-off in the Treasury market, which has caused yields on fixed income instruments of all shapes and sizes – including mortgages – to rise.Obviously, the Fed doesn’t want a rapid rise in rates. But how worried should the Fed be about the impact of tapering fears on mortgage rates, specifically?

“Not very,” says Ed Stansfield, chief property economist at Capital Economics.

“The rise in mortgage interest rates has the potential to generate a hiatus in housing sales and starts over the summer,” Stansfield wrote in a note to clients. “At the margins, the rise also adds to the case for expecting the housing recovery to slow later this year. But mortgage rates are still too low to pose a serious threat to the recovery.”

Remember, mortgage rates have only returned to levels seen in 2011 and early 2012.  Moreover, the purchase applications index was “essentially unchanged from its average in the month leading up to the trough in mortgage interest rates.”

Of course there is a lag in between rising mortgage rates and mortgage demand. So, the Fed will be watching.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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