Home Loan And Refinancing Demands Increase
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(Everyday we get more bad news about the housing market splattered across every newspaper, magazine and news broadcast in the United States. )
Home sales are down and so are prices, but one industry directly linked to the housing market reported some good news this week, and that is the mortgage and refinancing industry.
A mortgage industry company recently reported that there has been an increase in both the amount of home loans being taken out as well as the amount of refinancings.
A November 8, 2006 article by Julie Haviv from Reuters, “Home loan demand rises as mortgage refinancing surges,” discusses these good findings for the housing market as a whole.
“Mortgage applications rose sharply last week, reflecting a surge in refinancing loans as interest rates remained near recent lows, an industry trade group said Wednesday.”
“The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and purchasing loans, increased 8.8% to 620.9 the week ended Nov. 3 from the previous week's 570.8.”
One of the main reasons for these positive results is because interest rates are the lowest they have been in a long time.
The Federal Reserve, recently raised interest rates a consecutive 17 times in a row this past summer in an effort to combat inflation, and the rates are finally on their way down and are now fairly low.
So now that interest rates are low, consumers know that they may go up again very soon, and are therefore taking out mortgages or refinancing an existing loan, depending on their specific circumstance.
“Dean Maki, chief U.S. economist at Barclays Capital in New York, said the indexes tend to be volatile but the steady decline in interest rates the past few months has been good news for the U.S. housing market.”
“‘The bottom line is that the decline in mortgage rates has been a significant development and that combined with strong gains in real income for consumers does suggest that home sales are set to stabilize,’ he said. ‘Overall economic growth is picking up in the fourth quarter even as housing stays weak.’”
The interest rate for the average 30-year fixed-rate mortgages was at 6.24 percent last week. This is an unchanged number from the week before, but it is definitely well below a four year high of 6.86 percent in June.
Interest rates were also well below a year ago level of 6.31 percent.
“Fueling the rise in mortgage applications last week was an 11% rise in the MBA's seasonally adjusted index of refinancing applications to 1,897.9. The refinance share of applications edged up to 46.3% from 45% the previous week.”
Although mortgage lenders are definitely benefiting from the increase in home loan and refinancing applications, the rest of the housing industry is still suffering.
Hopefully this will help pull the housing market out of its slump a little bit as consumers take advantage of the low rates and start to buy houses.
