Mortgage Rates Steady As Refinances Continue To Increase

June 04th, 2010

Mortgage rates have been stuck on LOW. Federal Reserve Chairman Bernanke comments on jobs, what does that mean to mortgage rates? With little economic data to move the mortgage markets this past week mortgage rates have reacted to the stock markets’ ups and downs. Continuing low mortgage rates have refinance calculators busy as homeowners determine their savings. Here is a recap of the past week’s economic data and how mortgage rates are impacted to assist you in making your mortgage decisions.

Refinance Mortgage Applications Continue to Increase

The Mortgage Bankers Association Weekly Application Survey for the week ending May 28, 2010 reported continuing increases in refinance mortgage applications and decreases in purchase mortgage applications, following a trend of the past four weeks. Refinance applications were 74% of all new applications processed in the past week.

The decline in purchase mortgage applications was expected due to the April 30th deadline for home buyers to enter purchase contracts to be eligible for the IRS home buyers tax credit. What is surprising is the size of the decline in purchase applications with continuing low mortgage rates and the affordability index exposing more Americans to home ownership. How much of the housing market became “pre-sold” in March and April because of the pending tax credit expiration?

Looking ahead, this index, the number of purchase mortgage applications taken by lenders, will give a strong indication of the overall health of the economy. Once the market gets back to “normal”, i.e. without any special tax credits or other abnormal incentives, the number of home purchases will show a lot about consumer confidence, how employment is impacting economic recovery and how strong any recovery taking place really is. In the meantime look for lenders to start offering better rates and/or fees for purchase mortgage transactions to encourage applications. Use a prequalification calculator to determine your purchasing power in today’s market with the low mortgage rates available.

Fed Chief Talks About Employment

With the U.S. Labor Department announcing that 453,000 new claims for unemployment insurance were filed last week it appears any recovery that is taking place is still doing so without bringing along the labor markets. This was corroborated on Friday morning when the Labor Department announced that 431,000 jobs were added to the U.S. economy in May, however only 41,000 of those jobs were added in the private sector. The overwhelming number of jobs, 411,000, were temporary census workers.

Concern about the slow pace of job growth in the private sector does impact mortgage rates. Speaking to a business group in Michigan on Thursday, Federal Reserve Chairman Ben Bernanke said, “One particularly difficult issue is the high rate of unemployment. High unemployment imposes heavy costs on workers and their families, as well as on our society as a whole.” Decrying the lack of credit being offered to small and medium size businesses, Bernanke is encouraging banks to lend to businesses so that they might expand and begin to re-hire laid off workers.

Bernanke’s comments combined with the weak employment data released this week indicate that the Federal Reserve’s course of maintaining record low interest rates for an extended period. As mortgage seekers continue to use mortgage calculators to determine their savings from mortgage refinances or purchasing power in buying a new home, the economic news suggests continued low rates.

Stocks Up Rates Up, Stocks Down Rates Down

As the economy struggles in the early stages of recovery and all the financial woes of Europe are not yet over investors are a bit skittish, moving their investments between equities (stocks) and the safety and security of bonds. Bond investments are what impact mortgage rates, the more money invested in bonds the higher bond prices go which means the lower interest rates go. An easy way for you to check the general direction of mortgage rates is to listen to the stock reports on your radio, news stations or paper. If you hear stock prices are moving up then you can figure so are mortgage rates, if stock values are dropping then mortgage rates probably are dropping as well.

If you are looking to time a dip in rates, good luck. Watching the markets can help, but unless you are properly prepared you may miss any dips that come along. Use the free mortgage calculators on this site to prepare yourself so when you contact a mortgage lender you are in position to lock in a historically low mortgage rate.

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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