| Low Interest Mortgages But Few Applications |
| By Credit Federal |
Published
01/29/2009
|
Home Loan
|
|
|
|
|
Lowest Mortgage Interest Rates and Applications
Home mortgage loan applications fell to record low levels although rates are equally at record lows.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity plunged 38.8% to 732.1 the week ended 1/23.
Fixed 30 year mortgage rates averaged 5.22% in the week, little changed from 5.24% the prior week but well up from 4.89% in the early part of the month.
Analysts blame rising government borrowing to pay for financial bailouts and expected stimulus to stave off recession have begun to push up Treasury yields, offsetting Fed efforts to drive mortgage rates lower. Benchmark 10 year Treasury note yields, which help govern mortgage rates, have climbed nearly a half-percentage point since late last month to 2.53%.
The Fed's plans to lower home borrowing rates this year with purchases of up to $600 billion in mortgage related securities had resulted in a spike in mortgage applications, mostly for homeowners seeking to refinance loans at lower rates. Lower rates boosted affordability on homes, whose prices nationally have fallen more than 25%, to 2004 levels, according to Standard & Poor's/Case-Shiller indexes.
The National Association of Realtors said existing home sales rose 6.5% last month from the previous month as prices averaged 15.3% below a year ago. That report suggested sales have bottomed, according to Moody's Economy.com.
But skeptics say tight lending conditions and lower than expected appraisals will limit loan approvals. Higher interest rates would also cut homeowners' savings via refinancing, a source of cash that could be recycled into the economy.
The MBA's seasonally adjusted index of refinancing applications plummeted 48% to 3,373.9 last week. The gauge of loan requests for home purchases declined 2.9% to 294.3.
Apply for a mortgage loan quote.
|
