Mortgage applications jump after rate drop

Mortgage applications jumped last week to their highest since late May as interest rates tumbled below 5 percent, data from an industry group showed on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended Sept 18 increased 12.8 percent to 668.5, the highest level since the week ended May 22.

While consumers clamored for home refinancing loans, their appetite for applications to buy a home, a tentative early indicator of sales, was also robust. The overall trend bodes well for the hard-hit U.S. housing market, which has been showing signs of stabilization.

Eric Belsky, executive director at Harvard University’s Joint Center for Housing Studies, said several months of improvement in new and existing home sales is a positive sign.

“Low interest rates on mortgages are important to the fledging housing recovery,” he said.

This has made a significant impact on the affordability front and where they may be headed could be key to a sustained recovery, he said.

“While an uptick may bring buyers anxious that rates will keep rising into the market temporarily, a material increase in rates could threaten the rebound.

Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 4.97 percent, down 0.11 percentage point from the previous week. It was the first time since the week ended May 22 that the rate on this most widely used home loan was below 5 percent.

However, the rate remained above the all-time low of 4.61 percent set in the week ended March 27. The survey has been conducted weekly since 1990. Nevertheless, interest rates were well below year-ago levels of 6.08 percent.

Low mortgage rates, high affordability, and the government’s $8,000 tax credit for first-time home buyers — part of the stimulus bill — have helped stabilize the market.

But with the tax credit set to end November 30 and distressed properties making up a high proportion of sales, the flurry of activity masks uncertainty about the long-term outlook.

The MBA’s seasonally adjusted purchase index rose 5.6 percent to 288.3, driven by applications for government-insured loans. Indeed, the government purchase index was at the highest level ever recorded in the survey and the share of purchase applications that were government-insured was 45.7 percent, the highest share since November 1990, the MBA said.

The four-week moving average of mortgage applications, which smoothes the volatile weekly figures, was up 4.3 percent.

The Mortgage Bankers seasonally adjusted index of refinancing applications increased 17.4 percent to 2,881.5, with the index at its highest since the week ended May 29.

The refinance share of applications increased to 63.8 percent from 61.0 percent the previous week, but remained significantly lower than the peak of 85.3 percent in the week to January 9. The adjustable-rate mortgage share of activity increased to 6.7 percent, up from 6.0 percent the prior week.

The U.S. housing market has suffered the worst downturn since the Great Depression of the 1930s and its impact has rippled through the recession-hit economy, as well as the rest of the world.

The housing market, however, has been showing signs of stabilization, with sales rising and home price declines moderating in many regions of the country. In fact, home prices in some areas have risen.

Some analysts, however, say prices may fall again, with a new wave of foreclosures in the pipeline.

Fixed 15-year mortgage rates averaged 4.41 percent, unchanged from the previous week. Rates on one-year ARMs edged down to 6.52 percent from 6.61 percent.


  1. woody188

    It was mostly re-fi’s which is fine, but it doesn’t remove excess inventory. It’s what is missing, like the average sale price, that speaks volumes without saying a word. I predicted a floor of $120,000 average sale price over a year ago down from $230,000. Average home price must align with average wages and it does at around $120,000. I’m betting we are at around $150,000 or so this week. This puts me strongly in the continued declines side and has me waiting on the side lines as I am in the market to purchase another home.

    Our Liberties We Prize and Our Rights We Will Maintain

  2. Carl Nemo

    Hi Woody188,

    You should consider checking out local banks in your area for high dollar repo’s.

    I live in the Pacific Northwest. Many half million dollar plus homes have been built during the past 10 years on 5-10 acre parcels.

    Many of them have been repossessed and are now being eagerly dumped in the 150-200 thousand range. These aren’t beat up repo’s as you find in the burbs or close to the inner city. So if you are willing to commute you just might find your dream home on expansive acreage in your area.

    A woman I know and her husband both with stable jobs were able to buy a home that went for $575,000 new on eight acres for $150,000!!! The home had privacy, an orchard, a very long 300 foot private driveway to the premises with all he amenities; ie., 4200 sq. ft., deluxe island kitchen with granite counter tops, 3.5 baths, 5 bedrooms etc. Not a “dump” by any means. The owners were finally forced out because they couldn’t cover the taxes relative to their mortgage payment…!?

    So if you shop “smart” and are willing to commute some distance you just might find your dream home and a “safe” hideaway for troubled times to come in your area.

    Good Luck!

    Carl Nemo **==

  3. woody188

    Have my eye on a 5-acre place in Circleville which is about half an hour drive from Columbus where I do most of my work. Older style home with lots of outbuildings like hog and chicken pens and a barn. Be a great place to grown your own food and small livestock operation. I was an agriculture major while at Ohio State and it’s my dream to own a farm while the computer work pays the bills.

    But it looks like I might be getting a 3-acre place in Circleville for free because my father-in-law wants out of it and doesn’t care to sell it. That way we can better sell our home because it will be empty and ready for immediate possession. Only will have to pay taxes on the new place as there is no mortgage and the deed will remain in my father-in-laws name. So it will be temporary until our place sells, then we’ll find a place more suited for us and he will then sell the 3-acre place.

    Or we may keep our place in the city as a rental. Lots of homes in that neighborhood are moving to rental properties and it’s close to everything in Columbus. It’s not even 5 minutes drive to downtown where we are at near Grove City.

    I have some really outstanding in-laws.

    Our Liberties We Prize and Our Rights We Will Maintain