Mortgage Applications Up on Lower Rates

[Mar 26, 2009.]

 

U.S. mortgage applications increased last week as record low interest rates drove many homeowners to look into refinancing their mortgage.

The Mortgage Bankers Association (MBA) said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, increased 32.2 percent to 1,159.4 for the week ended March 20. Refinancing accounted for 78.5 percent of all applications.

The average contract interest rate for  30-year fixed-rate mortgages decreased to 4.63 percent from 4.89 percent, with points decreasing to 1.13 from 1.23 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.


Interest rates on mortgages fell after the Federal Reserve last week said it would buy Treasury securities for the first time in more than four decades as well as more than double its planned purchases of mortgage-related securities.

“Mortgage rates fell sharply to low levels not seen in six decades following the Federal Reserve’s announcement on the Treasury bond and mortgage-backed securities purchase programs.  The drop offered a sizable refinance incentive for most homeowners sparking a pickup in refinance activity,” said Orawin Velz, Associate Vice President of Economic Forecasting.

Homeowners that are in the process of refinancing their mortgage are learning about a new development in the lending industry in addition to lower rates. The cost to obtain a new loan has increased dramatically in the last couple of years.

According to Bloomberg:

The average cost of getting a U.S. mortgage was $640 per $100,000 in December and January, the highest since October 2000, according to Federal Housing Finance Agency data. In 2005, the end of a five-year housing boom, the cost was $280 per $100,000, the lowest on record.

Banks have already begun to implement new adverse market fees that Fannie Mae and Freddie Mac have scheduled to go into effect on April 1st.

 

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.