Mortgage Applications Dip Mortgage Rates Steady

March 30th, 2010

Continuing trends were the theme this week for mortgage applications and mortgage rates. Economic and mortgage data released highlight two constants from the past several weeks: dropping mortgage applications and steady mortgage rates.

Here is a brief wrapup of the week’s economic news and data released by Thursday, March 25.

Foreign Debt Hurts U.S. Mortgage Rates

Debt troubles in Greece that are spreading through the European Union created a major sell off in the US mortgage-backed securities markets. If you had a mortgage application in process for a refinance mortgage or purchase mortgage, you would have done well to lock your mortgage rate on Tuesday, as the market had its biggest one-day increase in yields (rates) in more than a month, as investors worried about foreign debt sold fast and furious on all bond markets.

Mortgage Applications Down Mortgage Rates Flat

In its Weekly Applications Survey for the week ending March 19, the Mortgage Bankers Association (MBA) announced that mortgage applications for the week dropped 3.9%. This drop continues a decline in weekly mortgage applications reaching back over seven weeks. Loan applications for refinance mortgages continue to outpace loan applications for purchase mortgages, but the gap is shrinking. For the week ending March 19, refinance mortgage applications composed 65% of total loan applications, the lowest level since the last week of October 2009.

In the release, the MBA announced that mortgage rates for the contract 30-year fixed rate for purchase mortgages of 80% loan-to-value ratios remained essentially flat. The interest rate increased to 5.01% from 4.91%; however, the drop in cost (i.e., points) to 0.76 from 1.30 leaves the effective rate flat. The contract 30-year rate has been very steady for several weeks in the survey.

Home Sales

Existing home sales for February were down a bit from January, though not significantly. This was not an unanticipated release, given the mirroring trend in weekly mortgage applications. New home sales were down significantly and are at their lowest number in several years. Much of the decline was attributed to the bad winter weather in February. Declining home sales as a trend may increase, as Bank of America has led other major lenders in changing their loan modification guidelines, agreeing to reduce principal on over 65,000 borrowers’ mortgages. Increased modifications should result in decreased foreclosures, which should decrease inventory for existing home sales.

Employment

This past week, 442,000 Americans filed initial claims for unemployment insurance. Currently there are 4.65 million Americans on continued unemployment and over 8 million jobs lost since January 2008. The initial claims number has been dropping over the past several weeks, which is somewhat good news. The bad news is that almost half a million men and women are filing for unemployment each week, but a sustained trend in decreasing new unemployment claims would signal a bottoming out of layoffs in the economy.

More Reform from Washington

With the health care reform bill signed into law by President Obama this week, the Senate begins to focus on the next sector it wishes to overhaul and significantly reform: banking and finance. The Senate Finance Committee is in the process of putting together major reforms that will impact banking, lending, investing and all sectors of the financial industry. Stay tuned to see how proposed reforms will impact your mortgage applications and mortgage rates.

Mortgage rates are under increasing pressure to rise. If you are planning a mortgage refinance or home purchase in the near future, keep an eye on the trends and be ready with your mortgage application to lock in a low mortgage rate.

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