Refinance Applications Make up Bulk of Loan Activity

[Mar 19, 2009.]

 

The Mortgage Bankers Association said Wednesday that last week, according to Reuters, that mortgage applications surged as the borrowing rate on 30-year fixed-rate home loans fell 0.7 percentage point, to 4.89%. The market index, which includes purchase and refinance loans, jumped 21.2%, to 876.9, the highest since mid-January. The spike in applications was due to an increase in refinancing, which jumped 29.6%.

"Borrowers are increasingly taking advantage of the low mortgage rates available in the market today," said Tom Lund, executive vice president, Single-Family Mortgage Business, n a recent Forbes article. "We anticipate that volumes will increase even more as millions of additional homeowners become eligible to refinance under the President's Making Home Affordable plan. Providing broader access to affordable, sustainable mortgages through expanded refinancing opportunities is a critical part of preventing future foreclosures and hastening recovery."

Refinance applications made up 73 percent of all loan applications last week. Purchase applications rose just 1.5 percent to a one-month high of 257.1.

The Obama administration is hoping to stimulate first-time home buyer demand by offering a tax credit for those that purchase a home between January 1st, 2009 and December 1st, 2009. The tax credit does not need to be repaid and will equal 10 percent of the home's purchase price up to $8,000. Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.

The first-time buyer market is an important one in helping restore stability in the real estate market. First-time buyers do not currently own a home that needs to be sold prior to purchasing a new home. For that reason, getting more first-time buyers off the fence will help add to demand while not adding to the current supply of homes for sale.

 

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.