Demand for Home Mortgages on the Rise

[Nov 13, 2007.]

A leading industry group says that demand for applications for home and refinance mortgages is increasing.

The results are somewhat surprising, given the fact that the total number of loan applications had decreased in the two previous weeks.

The news comes from the Mortgage Bankers Association, which tracks home loan application trends. Figures show demand jumped 2.4% in the week which ended October 5th. Demand reached a high in March, but slumped in July.

The greatest increase in demand was in the realm of refinancing, which increased 2.7%, while applications for loans to buy homes edged up 2.1%. Refinancing requests numbered 46.2% of the total number of loan applications. The demand for refinancing rose amidst news that adjustable rate mortgages will be readjusted to much larger interest rates.

The rates for the average 30-year fixed-rate mortgage jumped 0.08% to 6.4% recently. That's 0.13 point higher than it was at this time 1 year ago.

Meanwhile, the rate on a 1-year, adjustable rate mortgage dropped 0.05% recently to 6.15%. That's an increase over what the rate was at this time last year.

Uncertainty continues to reign supreme in the U.S. housing market, which is suffering its worst slump in years. Home sales, as well as prices for homes, have been on the decline. The situation has been so bad that it has raised fears of a recession. However, while the housing crisis has affected the construction industry and related businesses, it has not yet had a spillover effect on the rest of the economy.

The Federal Reserve's recent decision to cut a key interest rate seems to have had a positive effect on the economy. It's unclear whether additional rate cuts are likely in the immediate future, although a number of investors are pushing for additional rate reductions. The housing market is not expected to recover until the middle of 2008.

Julie Ann Amos
November 13th 2007

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