Refis At Highest Levels In Twenty Months

August 20th, 2010

American home owners are refinancing their mortgages as they ride the dropping mortgage rates down below 4.5%. Economic news does not support higher rates in the near future. Here is the weekly recap of news impacting mortgage rates and the mortgage industry, as you will see refinance calculators continue to be busy for a reason.

January 2009 Redux

In its Weekly Applications Survey released on August 18th the Mortgage Bankers Association reported a jump in refinance applications of 17.1% for the week ending August 13th compared to the prior week. With the increase, refinance applications comprised 81.4% of total mortgage applications taken by MBA members. This is the highest percentage of mortgage refinance applications since January 2009, a month when mortgage rates had dropped 1% from November 2008 and the beginning of the current refinance boom.

Overall applications in the industry increased 13% for the week, the increase led by the jump in refinances but also dampened by a 3.4% decline in purchase mortgage applications. This is the first decline in weekly purchase applications in five weeks. Were the prior four weeks of growing home purchase activity an aberation or was last weeks decline just home buyers taking a break? This is a critical question not only to the housing markets but to the economy as a whole since the real estate industry and housing markets play critical roles in economic activity and sentiment.

Have you used a refinance calculator to determine if you should refinance your 30 years fixed rate, or ARM, mortgage to a 15 year fixed rate? Plenty of home owners have as the MBA also reports that approximately one-third of the mortgage refinance applications for the week surveyed were for 15 year mortgages.

Freddie Says Drop 'Em

Continuing its trend for the past few months the 30 year fixed rate mortgage dropped ever so slightly again last week. Freddie Mac released its Primary Mortgage Market Survey on Thursday showing the average 30 year fixed rate mortgage at a cost of 0.7 origination points at 4.42%, down from 4.44% the week before. Stable and low are two factors that benefit anyone looking to purchase a new home or to refinance their mortgage.

Brother, Sister, Uncle, Dad, Can Your Spare A Job?

Thursday also saw the Department of Labor release numbers for unemployment insurance filings. For the week 500,000 individuals filed first time claims, this on top of the 484,000 who filed for the first time the week before. Having one million initial unemployment claims filed in two weeks does not signal healthy economic activity. While politicians, corporate leaders, bankers and bureaucrats point to the importance of jobs for economic recovery, none of them seem to be doing anything that has slowed the growth of unemployment, much less reverse the trend.

Stocks and Bonds Up and Down

This past week in the bond and equity markets seemed like a look to the past when the markets would see-saw up and down through the week. With the only market moving economic news for the week coming on Thursday investors appeared to ride corporate estimates and currency rumors. With green arrows for positive days and red arrows for negative days the weekly market charts look like loosely strung Christmas lights, a net result being most markets ended the week down on Friday from their openings on Monday. What does this mean? Investors are hoarding cash through and waiting before making their next move. Too much hoarding of cash is not good for any market--see Fall 2008 as an example.

In times of volatility, up and down markets, interest rates fluctuate more on a day-to-day basis making the decision to lock in a mortgage rate a bit more difficult. It is advisable to use the mortgage calculators to do your research and due diligence and be ready to complete your mortgage application and lock in your rate sooner rather than later.

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