Mortgage Rates Even Lower, Refis Increase More, and Other Mortgage News

July 09th, 2010

Mortgage rates dropped even lower this past week, keeping free mortgage refinance calculators busy again. With little economic news published this week, politics are the focus of the mortgage industry. A wrap up of news impacting mortgage rates and programs:

Mortgage Rates Creep Even Lower

In its weekly rate survey published June 8th, Freddie Mac reported the national average 30-year fixed mortgage rate to be 4.57% at a cost of 0.70 points origination. Barely below last week’s average of 4.58%, the decline is the seventh time in the last nine weeks the 30 year fixed rate has dropped. The average 15-year fixed mortgage reported by Freddie Mac is 4.07%, also at 0.70 origination points.

Use a free mortgage calculator to determine how much a refinance to a lower rate–or shorter loan term–may save you.

Refinance Applications Continue Climb

It was only two months ago that refinance mortgages had dropped to their lowest levels since October 2009.

Now, in its Weekly Applications Survey released on July 7th, the Mortgage Bankers Association (MBA) reported that refinance mortgage applications for the week ending July 2, 2010 were 78.7% of all applications taken for the week–nearly 4 of every 5 mortgage applications. Refinance applications increased 9.2% from the prior week, continuing the upward trend up as mortgage rates have trended down.

Meanwhile, the MBA reported purchase applications down 2% from the prior week–the eighth out of the past nine weeks that the number of purchase applications has dropped. June purchase applications were 15% lower than in May and 30% lower than their recent peak in April 2010–the deadline for home buyers to enter into a home purchase contract in order to be eligible for the federal home buyer tax credit. With purchase applications down, existing home sales have naturally decreased as well; look for another drop in sales for June.

With mortgage application volumes continuing to drop despite historically low mortgage rates, and both existing and new home sales volumes declining, how will home prices be affected? Home values in many areas of the country are currently stable or rising slightly.

Politics: Tax Credits and Reform

After the homebuyer tax credit loan origination deadline passed, Congress and the President extended the deadline for eligible home buyers to close their transactions from June 30, 2010 to September 30, 2010. This extension evidently affects over 150,000 home buyers potentially eligible for the tax credit. While Congress was also able to pass a bill that re-authorized the federal flood insurance program that expired June 1st, it has not yet been able to pass the massive financial reform bill.

With the death of West Virginia Senator Robert Byrd, this legislation is on hold in the Senate as it is doubtful there are enough votes to clear a filibuster without Byrd’s seat being filled by another Democrat. Included in the bill is a myriad of legislative policies that impact the mortgage industry. The most impactful is a proposal that would effectively eliminate no point and no cost refinance and purchase mortgages. Other items in the bill eliminate no income verification mortgages and many adjustable rate mortgage products.

The net impact on those seeking mortgages will be to reduce the mortgage products and financing options available to many borrowers. If you have been considering refinancing with a no point or no cost mortgage, you may want to hurry and apply for a refinance mortgage before it is too late.

Positive News

To to end our weekly mortgage market news on a positive note, credit card delinquencies are at an eight year low according to the American Bankers Association. Also declining in the first quarter were delinquencies on Home Equity Lines of Credit (HELOCs). This is good news for consumers as it should sooner or later encourage banks to loosen some of their credit criteria, if delinquencies continue to decline further or at least maintain current levels of just under 4% of all accounts being at least 30 days past due.

As well, only 454,000 people filed initial unemployment claims this week, down slightly from last week.

The Week Ahead

In the week ahead the Treasury will be auctioning several billion dollars in T-bills, as well as issuing retail sales numbers for June. Expect retail sales to be flat or show only small gains. Currently there appears to be no major economic news to push mortgage rates significantly higher.

Use a free online mortgage calculator to determine your options and take advantage of the incredibly low mortgage rates currently available.

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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