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Mortgage Applications On the Rise Last Week

[Nov 13, 2008.]


The Mortgage Bankers Association just released their Weekly Mortgage Applications Survey for the week ending November 7, 2008.

The Market Composite Index, a measure of mortgage loan application volume, was 425.0, an increase of 11.9 percent on a seasonally adjusted basis from 379.9 one week earlier.

The rise can be attributed to a decrease in interest rates from the week prior.
The average contract interest rate for 30-year fixed-rate mortgages decreased to 6.24 percent from 6.47 percent, with points decreasing to 1.17 from 1.19 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 5.90 percent from 6.14 percent, with points decreasing to 1.12 from 1.22 (including the origination fee) for 80 percent LTV loans.

Lower rates and costs are certainly good news for those looking to refinance their mortgage. It is important to understand that by the time this survey is released, rates have often changed quite a bit. These surveys also must make certain assumptions about the quality of the borrower and many consumers may find the terms available to them vary greatly from what is posted in similar surveys.

One interesting observation is that the adjustable-rate mortgage (ARM) percentage of activity declined to 2.3 percent from 2.5 percent the previous week. In March of 2005, that percentage hit a record high of 36.6 percent. Consumers are clearly becoming more conservative and looking for longer term fixed rate loans.

Also interesting to note is that the number of applications submitted last week were about 40 percent below where they were one year earlier. That is a substantial drop.

The survey lacks the ability to account for what percentage of those applications have or will be approved. As credit guidelines continue to tighten and the pool of eligible borrowes shrink, the percentage of of people able to refinance their mortgage may be much lower than believed.


About Author:

Chris Rocks is the Regional Director of the National Credit Federation (NCF), a consumer advocacy group that assists small business owners and consumers overcome debt and credit challenges.

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