Down: rates, confidence and applications

October 01st, 2010

A down week should benefit those looking for a refinance mortgage or a new home loan. Rates input for mortgage calculators tick a bit lower and mortgage activity slows. If you are researching mortgage rates and considering a new home loan or refinance mortgage here is some news from the past week that could impact your decision or transaction.

Savings grow as confidence falls

The American economy is driven by the consumer, approximately 70 percent of our economy is based on consumption. Economic data released this week by the Commerce Department and the Conference Board showed the link between how you feel and how you treat your money, and the results are not good news for the economy.

The Consumer Confidence index for September released by the Conference Board showed a sharp drop to 48.5 from 53.2 in August. In the release of the data the Conference Board indicated that more than half of the respondents feel business conditions will worsen in the next six months.

When economic uncertainty is in your future you will tend to save more and spend less. Commerce Department data on personal income, spending and savings reflected consumer confidence dropping as overall personal spending increased 0.4 percent in August as personal incomes rose 0.5 percent. As income is greater than spending that means personal savings have also increased, to 5.8 percent from 5.7 percent in July. This trend of tight spending and increased savings is not restricted to consumers.

The Business Roundtable, an association of Chief Executive Officers, announced that its members feel that the economy will grow 1.9 percent this year; last quarter the prediction was growth of 2.7 percent. The CEOs predict anemic growth in sales in the coming months. Cutting spending and saving cash has been enlarging company balance sheets for much of the year; the news from the Business Roundtable indicates that this trend will continue through the end of the year.

Home prices inch higher again

The S&P/Case-Shiller home price index was released on Wednesday and the median price nationwide increased for the fourth straight month by 0.6 percent from August. Overall the housing market in the index is 3.2 percent higher than a year ago. Dampening any exuberance that may result from the higher home prices, the slowdown in price increases over the last few months have many predicting prices will fall again soon.

With Sep. 30, 2010, being the deadline for all transactions to close to be eligible for the homebuyer tax credits, and the decline in sales activity in the summer following the initial deadline in April, the general expectation is for softer prices through the end of the year. In the Case-Shiller report ten of the twenty surveyed cities reported price declines.

Lower prices with lower rates means your prequalification calculator results could show increased purchasing power with your new home loan.

Refinance applications drop despite dip in rates

The Weekly Application Survey released by the Mortgage Bankers Association reported a 1.6-percent decline in refinance mortgage applications for the week ended September 24. For the past few weeks the survey has reported a decline in refinance applications despite continued low mortgage rates.

Purchase applications had a relative strong showing after a summer of decline, edging up 2.4 percent from the prior week. Leading the charge in purchase applications was a 4.5 percent increase in government applications as homebuyers looked to get their FHA applications in before the increase in mortgage insurance fees for FHA mortgages kicked in on Oct. 4, 2010.

Freddie Mac announced the average 30-year fixed-rate mortgage at a cost of 0.7 origination points was 4.32 percent for the week ending September 30, 2010. This is a drop from 4.37 percent from two weeks earlier. This Freddie Mac benchmark rate has been under 5 percent since May 9, 2010.

If your mortgage rate is over 5 percent, use a refinance calculator to determine your savings and contact a mortgage professional to get started on your refinance mortgage to take advantage of historically low mortgage rates.

Use on-line mortgage calculators and available economic data to assist you with your decision making in purchasing a new home or refinancing your current mortgage.

Posted By :
Dennis C. Smith is co-owner and broker of record for Stratis Financial in southern California. He has over twenty years' experience in the mortgage industry.

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