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Wednesday, February 8, 2012

Mortgage Applications Surging up 23%.

Mortgage Applications Surging


The Mortgage Bankers Association reported that there was a surge of mortgage loan applications of 23% in the week ending January 13. This was up 23.1% from the previous week. Refinancing activity was up to 26.4% during the week ending January 13, which was the highest level since early August and comprised 82.2% of all mortgage activity. New mortgage applications climbed 10.3% week-over-week.


This surge is primarily due to new record low interest rates. The rates for 30-year and 15-year fixed loans fell to 3.89% and 3.16% in the week ending January 13. The vice president of research and economics at the Mortgage Bankers Association reported, “Interest rates dropped last week due to continuing anxieties regarding the fragile economic situation in Europe.” The interest rates for most loans fell, but the interest rates for a 30-year fixed-rate mortgage with jumbo balances rose from 4.36% to 4.40%.


Most people were taking advantage of the new lower interest rates to refinance their existing home loans instead of purchasing new homes. The chief economist for Fannie Mae, Doug Duncan, said, “[Home] sales are a lot less interest-rate sensitive than people think.” There are often many other factors that go into choosing a new home (including newly built homes and previously owned homes) than just lower interest rates, while people who are refinancing are happy in their homes and have already made a lot of those tough choices.


The new low home mortgage interest rates have had an important and positive impact on the housing market in two main ways. The people who have been able to refinance or buy a new home with new lower interest rates may have been able to bring down their monthly payment just enough to avoid foreclosure. There are also the people who have adjustable-rate mortgages that are considered to be risky since the interest rates can go up and down. If the interest rates had been higher when their loans reset, they may have been caught off guard. Now there are tens of thousands of homeowners that are seeing savings. And of course, everyone loves the savings they are seeing on their monthly payments.


If you would like to get in on these new super low home mortgage interest rates, the time to act is now. While home mortgage loan interest rates may fall, they may also go up. It is common for interest rates to start to bounce back as the economy bounces back. Congress has mandated that Fannie Mae and Freddie Mac increase the fees on their loans to pay for the extension of payroll tax cuts. Starting April 1, that could mean that borrowers may need to increase their upfront costs by half a point. This would add about $500 for every $100,000 in principal. Borrowers could instead pay the fee as a higher interest rate which would add an additional eighth of a point to the interest rate. This would add about $225 a year for a $250,000 mortgage. 


By refinancing your existing home mortgage or getting a mortgage for a new home at this time, you could end up saving a lot of money. Even just a 0.05% reduction on your home mortgage loan could add up to a big savings. You can use a mortgage refinancing calculator to add up just how much you would save.

Mortgage Applications Surging up 23%. No surprise there considering the rates are at the lowest in recorded history of tracking interest rates. There are so many buyers out there right now and too few good homes for sale.

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