Purchase Mortgage Applications Reverse Decline, Rates Lower As Economy Limps

June 18th, 2010

Refinance calculators have been buzzing. Mortgage rates continue their historic lows and stabilizing housing values in regions across the country have created a surge in refinance mortgage applications. Also increasing were applications for home purchases. With economic data showing the national economic recovery at a crawl there is little pressure for the Fed to raise interest rates. Read on for more mortgage market and economic news that impacts your mortgage rate for your refinance or purchase mortgage application.

Mortgage Applications Jump

On Wednesday the Mortgage Bankers Association (MBA) released its Weekly Applications Survey which compiles data from its members across the country. For the week ending June 11, 2010 the survey showed a surge in total application volume, up 17.7% for the week–despite the short week due to Memorial Day. Leading the application survey upward was a 21.1% increase in refinance applications as existing home owners took advantage of historically low mortgage rates. Refinance mortgage applications constituted 75% of the total applications taken by MBA members for the week.

Reversing a long period of decline, purchase mortgage applications increased for the first time in six weeks, up 7.3% from the prior week. After a surge in purchase applications in late April as the deadline approached to be eligible for the IRS home buyer tax credit, mortgage applications through May and the first week of June declined every week. With the increase in purchase mortgage applications last week there may be an indication of the slide is over and the real estate market returning to “normal” after the artificial boost created by the tax credits. Use a pre-qualification calculator to assist in planning for your new home purchase while mortgage rates are low and before FHA and other changes to mortgage policies impact you.

Mortgage Rates Steady and Low

The Primary Mortgage Market Survey released weekly by Freddie Mac is a survey of lenders nationwide for their conventional mortgages at 80% loan to value. For 30 year fixed rate mortgages the rate in the survey released on June 17th is 4.75% with a 0.70 point origination fee. This is up very slightly from the previous week’s survey which was 4.72%. With the economic data presented to the markets over the past week a steady and low mortgage rate was expected. Since last June the average 30 year fixed mortgage is down almost 0.75% in rate. As you use the free mortgage calculators remember these are average mortgage rates with 80% loan to value.

Economy Stagnant

The Federal Reserve Board of Governors and investors have a few key pieces of data they use to determine if higher interest rates are needed in the economy. In no particular order they are inflation, employment and consumer activity. The three segments of the economy are very inter-related and strong activity in any of them can lead to a bump up in interest rates. But recent news on the economy provides no incentive for mortgage rates to move up in the near future.

The Producer Price Index measures the cost of goods and services for wholesalers. In May the index declined 0.30% and stripping away food and energy costs the index is up only 1.3% from May of 2009. The Consumer Price Index also measures the cost of goods and services but for consumers. In May the index shrank 0.2%. Led by lower food and energy costs these two key indexes for inflation show no indications of a growing economy as reflected in prices the past month.

Backing up the data is the retail sales report for May which shows a decline of 1.1% from retail sales in April. So while prices were lower in May, or flat since the decline was so little, consumers were not buying from retailers.

Filling out the third leg of the economic stool interest rates perch upon, the Labor Department announce unemployment claims for the week increased from the prior week to 474,000 initial claims. Employers are still laying off workers at a large rate on a weekly basis.

Is this slow economic activity in any way related to the April 30th deadline for home buyers to enter purchase contracts to be eligible for the IRS home buying tax credit? One number that will definitely be related will the the existing home sales report for May which should be significantly lower than April’s number.

If you are considering a mortgage refinance in the near future you can be somewhat confident the rate you input in the refinance calculator should remain relatively stable for the next few weeks based on the current economic data. Day to day mortgage rates may see some small increases, but week to week they should remain fairly stable. And very low.

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.

Prequalification calculator tips and tricks

March 02nd, 2011

Are you paid weekly or every other week? Is semi-monthly the same as bi-weekly? One of the most important duties performed by a...  Read More

Home price and sales data show weaker housing markets

February 28th, 2011

If you've been thinking 2011 is the year for you to purchase a new home you may be weighing whether to purchase before rates climb...  Read More

Trust yourself, trust your home

February 22nd, 2011

Every newspaper has a section where, if you are in it, you will not be able to read your name and the story. It is the obituary section. Reading...  Read More

Mortgage rates remain above 5 percent as consumer prices rise

February 18th, 2011

There is a relationship between prices you pay in the store and the rate on your new home loan or refinance mortgage. This week two key indexes on prices were...  Read More

0 Responses to "Purchase Mortgage Applications Reverse Decline, Rates Lower As Economy Limps"

No Comments

Leave a Comment