Refinance applications jump on low rates
Despite dire predictions of a spike in interest rates stemming from the downgrade of the U.S. credit rating by Standard & Poor’s, mortgage rates dipped again last week. Accordingly, applications for a mortgage refinance rose.
The Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey showed that overall, mortgage applications increased by 21.7 percent during the week ending August 5, 2011 compared to the previous week. The Refinance Index increased by 30.4 percent over the previous week.
Refinancing and the economy
In general, weak economic news offers the silver lining of low mortgage rates, and this past week was no exception.
“Amid substantial market turmoil last week, mortgage rates dropped to their lowest levels of the year, and refinance applications jumped more than 30 percent to their highest levels of the year,” said Mike Fratantoni, MBA’s Vice President of Research and Economics. “Over the past month, refinance application volume has increased by 63 percent. Refinance applications for jumbo loans increased by almost 75 percent relative to last week. Despite these low mortgage rates, applications for home purchase have remained little changed through the summer.”
According to HSH.com, interest rates on 30-year fixed-rate mortgage loans dipped to 4.65 percent for the week ending August 5 and 15 year mortgage loans dropped to 3.87 percent. The average interest rate for a five-year adjustable rate home loan was 3.29 percent.
Mortgage refinance rates and the future
Mortgage experts at HSH.com suggest that the downgrade of the U.S. debt, Fannie Mae and Freddie Mac might have caused mortgage rates to rise if the economy was not already weak. One reason mortgage rates did not increase was that investors trying to avoid the volatility of the stock market purchased Treasury bonds. High demand for Treasury bonds keeps interest rates on the bonds low and mortgage rates generally follow the trends of Treasury bonds.
As the economy begins to improve and investors return to the stock market, mortgage rates are still expected to rise. If you are considering a home refinance, there may be no better time than the present to take advantage of low mortgage rates.
