Refinancing applications slow

Fewer homeowners are opting to refinance in spite of continued low mortgage rates. The Mortgage Bankers Association (MBA) reported that applications for home refinancing decreased by 6.2 percent during the week ending July 8, 2011 compared to the previous week. In addition, refinancing applications were 42.1 percent lower than the same week one year ago. Overall, mortgage applications decreased by 5.1 percent compared to the previous week, including an adjustment for the Fourth of July holiday.

According to HSH.com, average rates on a 30-year fixed-rate loan rose slightly to 4.88 percent with 0.27 points for the week ending July 8. Rates for a 5/1 adjustable rate mortgage (ARM) averaged 3.47 percent with 0.24 points.

While ARM applications represent just 5.5 percent of all mortgage applications, some borrowers may want to consider the potential savings generated by the lower home loan rates on ARMs. At this week’s rates, a borrower with a $300,000 loan willing to accept the risk of higher future payments would save about $20,000 over the next five years, according to HSH.com.

Home loan trends

HSH.com’s weekly mortgage trends report says that mortgage rates inched higher on better economic news. However, worse economic news, particularly about employment, is currently causing home loan rates to drip again. The Labor Department reported on July 3 that there were 418,000 new applications for unemployment and that the unemployment rate rose to 9.2 percent. Only 18,000 new jobs were created in June and many economists say as many as 300,000 new jobs are required each month for economic growth.

Refinancing options

For homeowners who want to refinance, mortgage rates remain low. The challenges for many homeowners include having sufficient equity in their property and good credit; both are required for a mortgage refinance approval.