Mortgage applications register an uptick in late October.

October 28th, 2010

Mortgage applications increased and mortgage rates inched higher for the second week. Mortgage calculators for new home loans and mortgage refinances have helped home buyers complete applications. In economic news this week the big story was home sales. Will the data impact future rates and prices?

Home prices remain flat

The Standard and Poors/Case Shiller Composite Home Price Index released this week saw fairly flat home prices across the nation as measured by August closings. Overall the index saw prices increase 1.9 percent from 2009, however adjusted for seasonal variation not one of the twenty metropolitan areas in the index showed any price increase. With distressed or bank-owned properties consisting of almost one third of most real estate markets many experts are skeptical for any price increases through the end of the year.

If you’re considering refinancing your existing mortgage, you could be impacted as falling home prices increase loan to value ratios. Higher loan to value ratios could require you to have mortgage insurance as part of your mortgage refinance, thereby decreasing some of your potential savings. If you are using a refinance calculator to determine your monthly savings and are concerned about declining home values in your area you should strongly consider completing your mortgage application soon.

Mortgage applications rise

In its Weekly Application Survey the Mortgage Bankers Association announced that refinance and purchase mortgages increased for the week ending October 22nd . Refinance applications still drive the mortgage industry with over 80 percent of total applications. Though purchase applications increased for the week by almost 4 percent, purchase mortgage applications are 30 percent below 2009 levels for the same week.

Mortgage rates inch up again

Although the increase was very moderate mortgage rates inched up to 4.23 percent at a cost of 0.70 origination points in Freddie Mac’s Primary Mortgage Market Survey for the week ending October 28th. This is the second week in a row the 30-year fixed rate mortgage has increased in Freddie Mac’s survey.

A rise in home sales, old and new

Driving investment markets this week and the big news on the business pages was the data on existing and new home sales. Early in the week the National Association of Realtors reported that sales of existing homes were up 10 percent in September compared to August. That makes two months in a row with higher home sales, much needed increases following big drop-offs in May and June following the expiration of the federal home buyers tax credit.

What’s ahead for mortgage rates

Next week the Federal Reserve will announce more detailed information of its intention to help get the economy growing at a faster pace. Fed Chief Ben Bernanke and other Fed Governors have made several remarks about purchasing more assets, i.e. U.S. Treasury bonds. But there is reason to believe that such a move by the Fed may not have much of an impact on the economy.

While an infusion of government cash may help to keep a lid on long term lending rates, including mortgage rates, it may have little ability to stimulate private sector growth and job creation. Interest rates have been extremely low for some time, and due to lack of credit and uncertainty of future expenses due to government activity, businesses have tended to stand pat on their spending rather than invest in growth and jobs.

Between the election on Tuesday and the Fed announcement there will be plenty of news to move mortgage rates. If you are using a mortgage calculator to determine your options for refinancing an existing mortgage or purchasing a new home, keep an eye on what should be an interesting week.

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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