The average loan size for home purchases reached $294,000 last week, the highest amount since the Mortgage Bankers Association started keeping records 25 years ago.
That figure signals where the action is in the housing market. “The record-high average loan size indicates that the strength of the market remains at the high end,” says Mike Fratantoni, the chief economist of the Mortgage Bankers Association.
While loan amounts increased, so did the cost of borrowing money. The average rate for a 30-year, fixed rate loan last week was 4.01 percent, the highest level so far this year and up from 3.96 percent the previous week, according to the Mortgage Bankers Association.
The association expects mortgage rates to continue marching upward as strong jobs data reinforces expectations that the Federal Reserve will raise interest rates as soon as June. The organization predicts long-term mortgage rates will reach 4.6 percent by the end of this year and 5.4 percent by the end of 2016.
Today’s rates still remain extremely low by historical standards. In 2008, before the housing bust, rates were around 6.5 percent.
While millions of American have refinanced at the low rates of recent years, a National Bureau of Economic Research paper published last summer found that one in five households that could have refinanced had not yet done so.
The share of refinance activity last week declined to 60 percent of mortgages from 62 percent the week before. Homeowners who miss this opportunity to refinance could end up paying an additional $11,500 over the life of their mortgage, according to the NBER paper.
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