Mortgage Applications on the Decline

[Jun 17, 2007.]

 

It appears that mortgage applications in the U.S. are decreasing. One industry group said that the culprit is a decline in demand for home refinancing since interest rates are now peaking at seven-month highs.

The Mortgage Bankers Association reports that requests for refinancing and purchasing loans decreased 7.3 percent for the week ending May 25 th. Still, loan applications are up 17.4 percent from last year's totals.

In a published report, Torsten Slok, an economist at Deutsche Bank, noted the effect that interest rates are having on mortgage demand. Slok was quoted as saying, "It has become more expensive to buy a home today than it was a month ago. Affordability has become an issue again."

The borrowing costs on 30-year fixed rate mortgages averaged 6.32 percent, up 0.09 percent from the week before. That's the highest rate since the week ending October 20 th.

Overall, though, interest rates are far below last year's level of 6.66 percent.

There appear to be a number of factors contributing to the current housing slump. To begin with, there's a huge supply of homes for sale. Also, the subprime mortgage market has taken a downturn and lenders' underwriting standards are tightening.

As Slok stated in a published report, "The ongoing correction in the housing market continues. The good news is that the biggest part of this correction is behind us."

Fixed 15-year mortgage rates stood at 6.05 percent, up from 5.96 percent. Meanwhile, rates on one-year adjustable rate mortgages, or ARMs, rose to 5.72 percent.

Still, the economic situation could turn around in the coming months. It's possible that the real estate market is simply experiencing a cyclical downturn and could rebound in short order. In the meantime, however, it could be considered a buyer's market, meaning that prospective buyers may be able to find deals that they wouldn't be able to secure otherwise.

Julie Ann Amos
June 17th 2007

More Information:

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