Drop in Residential Mortgage Applications

February 18th, 2010

The Mortgage Bankers Association announced on February 10 that residential mortgage applications for the first week of February dropped 1.5% from the previous week. The drop in applications came despite a drop in interest rates from the week prior.

Mortgage Rates Stay Low

The contract rate for 30-year fixed rate mortgages went below 5% again, finishing the week at 4.94% at an average cost of 1.06% (including origination fees). The week before, the average rate and cost were 5.01% and 1.04%, respectively. What does this change mean? If you are applying for a $250,000 mortgage for a home purchase or refinance, the drop in rate would mean a savings of $10.68 per month for 30 years, at an increased cost of $50 for the transaction.

(For comparison, one year ago the average rate was 5.19%; the drop from that rate to today’s mortgage rate translates into savings of $38.33 per month for a $250,000 30-year mortgage.)

Applications for Home Purchases Drop

Mortgage refinance applications increased 1.4% from the prior week, but applications for home purchases dropped 7%. Of the total loan volume, mortgage refinance applications are over 69% of the national total.

One reason for the drop in application for home purchases is the winter storms that socked much of the country, from rainstorms and flooding on the West Coast to snowstorms and blizzards in the Midwest and East Coast. While borrowers can apply for mortgages online, most do not purchase a home without going out and seeing the property. Fewer viewings lead to fewer sales, which lead to fewer applications for purchase mortgages.

Looking Ahead: News Affecting Mortgage Rates

When the initial home buyer tax credit was set to expire in November 2009, the industry saw a spike in purchase applications as consumers rushed to beat the deadline. As a result of that spike, existing home sales subsequently fell in December 2009 and January 2010 from prior months. With the current tax credit for eligible first time buyers and move-up buyers set to expire at the end of April 2010, plus the expiration of the Federal Reserve’s $1.3 trillion mortgage purchase program at the end of March 2010–which may put upward pressure on mortgage rates–the industry is expecting another surge in purchase mortgage applications in March and April 2010.

The Mortgage Bankers Association announced on February 10 that residential mortgage applications for the first week of February dropped 1.5% from the previous week. The drop in applications came despite a drop in interest rates from the week prior.

Mortgage Rates Stay Low

The contract rate for 30-year fixed rate mortgages went below 5% again, finishing the week at 4.94% at an average cost of 1.06% (including origination fees). The week before, the average rate and cost were 5.01% and 1.04%, respectively. What does this change mean? If you are applying for a $250,000 mortgage for a home purchase or refinance, the drop in rate would mean a savings of $10.68 per month for 30 years, at an increased cost of $50 for the transaction.

(For comparison, one year ago the average rate was 5.19%; the drop from that rate to today’s mortgage rate translates into savings of $38.33 per month for a $250,000 30-year mortgage.)

Applications for Home Purchases Drop

Mortgage refinance applications increased 1.4% from the prior week, but applications for home purchases dropped 7%. Of the total loan volume, mortgage refinance applications are over 69% of the national total.

One reason for the drop in application for home purchases is the winter storms that socked much of the country, from rainstorms and flooding on the West Coast to snowstorms and blizzards in the Midwest and East Coast. While borrowers can apply for mortgages online, most do not purchase a home without going out and seeing the property. Fewer viewings lead to fewer sales, which lead to fewer applications for purchase mortgages.

Looking Ahead: News Affecting Mortgage Rates

When the initial home buyer tax credit was set to expire in November 2009, the industry saw a spike in purchase applications as consumers rushed to beat the deadline. As a result of that spike, existing home sales subsequently fell in December 2009 and January 2010 from prior months. With the current tax credit for eligible first time buyers and move-up buyers set to expire at the end of April 2010, plus the expiration of the Federal Reserve’s $1.3 trillion mortgage purchase program at the end of March 2010–which may put upward pressure on mortgage rates–the industry is expecting another surge in purchase mortgage applications in March and April 2010.

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