Time to DisARM

"U.S. mortgage applications rose for the first time in three weeks, reflecting a modest increase in home purchasing loan requests before the Federal Reserve's widely expected interest-rate hike, an industry trade group said on Wednesday."

"The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity for the week ended March 24 rose 1.2 percent to 571.7 from the previous week's 565.0, its lowest level so far this year."

Read that again... mortgage applications rose for the first time in three weeks... but they didn't rise to previous year levels... they didn't rise implying an increase in demand... they simply rose 1.2% above the previous week. Remember, the week that was the third week of declining mortgage applications?

"Douglas Duncan, the MBA's chief economist, attributed the slight uptick in demand to this week's Fed meeting."

"An increase in applications is typical ahead of a Fed meeting," he said. "People are aware that rates are going to rise, so they lock in ahead of time."

"In the first meeting since Ben Bernanke took over as Fed chairman, the policy-setting
Federal Open Market Committee raised its federal funds rate by a quarter-percentage point to 4.75 percent on Tuesday, as expected. It was the U.S. central bank's 15th straight rate hike since June 2004."

"Historically low mortgage rates have fueled a five-year housing boom, helping support the U.S. economy's recovery from recession despite uncertain business investment. Most analysts contend that mortgage rates are on the rise. While they may differ on whether or not there is a housing bubble, most agree that the market is cooling off from its record run."

"The ARM share of activity rose to 28.7 percent of total applications from 28.3 percent the previous week. Refinancings fell as a percentage of all mortgage applications, falling to 37.3 percent from 38.1 percent, the MBA said."

"Bob Walters, chief economist at Quicken Loans, an online mortgage lender, said long-term fixed rates are still attractive.

"And while the Fed indicated it may raise rates the next time it meets, long-term rates will continue to appeal to those in the market to buy a home or homeowners looking to disARM," he said."

"The MBA data is seen as an indicator of latest trends, following what were mixed signals on housing tendencies from other sources earlier this month."

"Last Friday, the U.S. government reported that sales of new U.S. homes took their biggest plunge in February in nearly nine years, while prices fell and the number of homes for sale hit a high, signaling significant slowing in the housing market."