The volume of U.S. mortgage applications shot up dramatically in the latest week as borrowers sought to take advantage of low interest rates, according to the Mortgage Bankers Association Wednesday.
“Many borrowers missed an opportunity to take advantage when rates dropped sharply for a brief period when the GSEs were placed under conservatorship,” said Orawin Velz, associate vice president of economic forecasting for the MBA. GSE stand for government-sponsored enterprises, meaning mortgage companies like Freddie Mac and Fannie Mae.
“When rates plummeted following the Fed’s announcement that it would buy GSE debt and MBS [mortgage-backed securities], many of those on the sidelines decided to quickly jump in and take advantage of lower rates before they began to rebound.”
The MBA’s weekly application index skyrocketed up 112.1 percent to a seasonally adjusted 857.7 during the week ended November 28, 2008, from 404.4 the previous week.
Both refinance home loans and home purchase mortgages increased in popularity, but the newly lowered interest rates made refinance applications jump by 203.3 percent while home purchase applications rose by just 38.0 percent. This growth in demand shifted the refinance share of total applications up to 69.1 percent, an increase from 49.3 percent the week before.
The rise in refinance demand was due in large part to lower interest rates, as struggling homeowners seized on the opportunity to get out of expensive adjustable rate mortgages.
The MBA reported that the average interest rate on a 30-year fixed rate loan fell to 5.47 percent during the latest week, excluding points, from 5.99 one week earlier.
Rates on fifteen-year fixed rate mortgages dropped to 5.13 percent from 5.78 percent the previous week, while one-year adjustable rate mortgages averaged a rate of 6.61 percent, down from 6.87 percent the week before.
“Many borrowers missed an opportunity to take advantage when rates dropped sharply for a brief period when the GSEs were placed under conservatorship,” said Orawin Velz, associate vice president of economic forecasting for the MBA. GSE stand for government-sponsored enterprises, meaning mortgage companies like Freddie Mac and Fannie Mae.
“When rates plummeted following the Fed’s announcement that it would buy GSE debt and MBS [mortgage-backed securities], many of those on the sidelines decided to quickly jump in and take advantage of lower rates before they began to rebound.”
The MBA’s weekly application index skyrocketed up 112.1 percent to a seasonally adjusted 857.7 during the week ended November 28, 2008, from 404.4 the previous week.
Both refinance home loans and home purchase mortgages increased in popularity, but the newly lowered interest rates made refinance applications jump by 203.3 percent while home purchase applications rose by just 38.0 percent. This growth in demand shifted the refinance share of total applications up to 69.1 percent, an increase from 49.3 percent the week before.
The rise in refinance demand was due in large part to lower interest rates, as struggling homeowners seized on the opportunity to get out of expensive adjustable rate mortgages.
The MBA reported that the average interest rate on a 30-year fixed rate loan fell to 5.47 percent during the latest week, excluding points, from 5.99 one week earlier.
Rates on fifteen-year fixed rate mortgages dropped to 5.13 percent from 5.78 percent the previous week, while one-year adjustable rate mortgages averaged a rate of 6.61 percent, down from 6.87 percent the week before.
by Alan Wint
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