Mortgage refinance applications decreasing

In spite of continued low interest rates for mortgage loans, applications for a new home loan or a mortgage refinance decreased last week, according to the Mortgage Bankers Association (MBA).

Overall, mortgage loan applications decreased by 2.7 percent during the week ending June 24, 2011, compared with the previous week. Applications for a mortgage refinance decreased by 2.6 percent. Refinance applications represented 69.5 percent of all mortgage applications last week.

According to HSH.com, the average interest rate for a 30-year, fixed-rate home loan was 4.77 percent last week with 0.28 points, unchanged from the previous week.

Home loan trends

Today, the Federal Reserve’s program of purchasing $600 billion in Treasury debt, known as QE2, ends, but this is not likely to have a major impact on home loan rates. Mortgage trend analysis by HSH.com anticipates mortgage rates for this week to remain similar to last week.

While a variety of factors impact mortgage rates, in general, a slow economy and a strong bond market tend to correlate with lower rates for home loans. Weak economic reports such as continued high unemployment and low GDP are likely to keep rates for mortgage rates low.

Volatility in the stock market seems to have slowed this week, and HSH.com says that any “significant improvement in the major stock indexes would come at the expense of Treasuries, driving interest rates a little higher than they have been of late.”

The MBA forecasts slight increases in mortgage rates at the end of 2011 and in 2012, with the average mortgage rate on a 30-year fixed-rate loan expected to be 5.2 percent during the fourth quarter of 2011 and rising to 5.7 percent by the fourth quarter of 2012.

While low interest rates have spurred applications for mortgage refinances in the past several months, unemployment and stagnant or declining home prices have prevented many homeowners from taking advantage of these low rates.