Home Refinancing Demand on the Rise

Date released Wednesday from the Mortgage Bankers Association showed that mortgage applications for home refinancing loans were up for the first time in six weeks and demand was at its highest level since the latter part of August.

An rise in home financing loans could potentially provide a much-needed boost to the sagging economy as it could translate to higher consumer spending in the coming months. Also, as more homeowners lower their monthly mortgage payments through refinance, it could lead to an overall reduction in the number of foreclosures.

The industry group reported its seasonally adjusted index of mortgage applications for the week ending for October 8th was up 14.6 percent from the previous week. The number reflects both refinancing and purchase loan applications. The four week moving average of applications, meanwhile, which is calculated to smooth out weekly volatility, was up 3 percent.

The MBA’s seasonally adjusted index of refinance mortgage applications rose by an impressive 21 percent to its highest level since the week ending August 27th, and an MBA spokesman said the figure is approaching its highest level of the year. The man added that while purchase activity remains relatively stagnant, applications for purchase mortgage applications have reached their highest level since the beginning of May.

The overall housing market has struggled since April 30th, when a round of popular federal tax credits for homebuyers expired. To use the credits, taxpayers had to sign a purchase agreement by April 30th and close by June 30th, though the closing deadline was later pushed back to September 30th. Mortgage industry insiders say that refinance activity has increased as interest rates have fallen, but many homeowners have been unable to qualify for loans due to tighter lending standards adopted by banks in the wake of the foreclosure crisis.

Analysts say that the decrease in interest rates has boosted both refinance and purchase mortgage activity, but so far not as much as had been hoped. They say that while the government has done a good job of taking action to keep borrowing costs low so that homeowners will want to buy and refinance, boosting the economy, they continue to stiffen underwriting guidelines so that most Americans are unable to qualify for mortgages.

The MBA’s seasonally adjusted purchase index, which is considered an early indicator of future sales, fell by 8.5 percent and reached its lowest level since the week ending September 24th. Analysts say purchase activity would likely pick up if there were more incentives to buy real estate, but Americans are unsure of just where the economy is headed.

Borrowing costs for 30 year fixed-rate mortgages, not counting fees, averaged 4.21 percent for the week, down slightly from the previous week, and the lowest average in the survey,s history, which goes back to 1990. Interest rates were also down significantly from their 2009 levels.

The average rate for a 15 year mortgage averaged a record-low 3.62 percent, down from the prior week’s 3.73 percent. Rates on the one year adjustable rate mortgage, meanwhile, averaged 7.03 percent, also down slightly from the previous week.