Why aren’t they connecting the dots?  Last week there was a 2.5 percent increase in the number of people submitting mortgage applications. The biggest increase in applications is for refinancing, which was up more than 4%. The Motley Fool covered the story, but didn’t even hint at what’s causing the increase. They just point out that applications rose, “despite a jump in interest rates.”

But it seems obvious what caused the increase: the fed cut rates by a quarter percent. Yes, there is a difference between the interest the Fed charges to make direct loans to banks and the interest that banks and other lenders charge for consumer mortgages. But for one thing, many people don’t realize that. (Not everyone spends time on LoanBiz before shopping for a loan!) And the fact remains, when the fed cuts rates, the reduced rate tends to trickle its way down to mortgages. Apparently, people aren’t wasting time getting their applications in.  And who can blame them.  It sounds like a good time to apply for a mortgage, especially for a refinance: housing values aren’t expected to rise, and interest rates are wonderfully low. That’s why applications are on the rise. Americans are starting to realize that this isn’t such a bad time to get a loan after all.  

This entry was posted on Thursday, December 13th, 2007 at 4:36 pm and is filed under Daily Pick. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.