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Mortgage Applications Rise as Interest Rates Fall

Last week’s Mortgage Bankers Association Survey, mortgage applications rose significantly (8.3% in one week), primarily due to refinance loans fueled by dropping interest rates.  In addition to the increase in applications, overall mortgage volumes increased as well. With the average fixed rate mortgage (FRM) on the true-blue 30-yr traditional running just below 5.5%, it’s easy to see why so many people are discovering this to be a great time to refinance. Rates are lower than they’ve been in the last two and a half years. Those that have potentially the most to gain are people who acquired their existing loan within the past two and a half years.  Those with older loans may qualify for a better rate if their credit rating has improved. And no matter when the current loan was originated, anyone with an ARM loan heading toward an increase should look to see whether this is the right time to refinance.

During the period in which the survey data was collected, which was the week ending January 18, two out of every three loan applications was for a refinance.  One of the more popular loan types was the 15-yr fixed rate mortgage, for which the average rate fell below 5%. A fifteen year mortgage, provided you are in a position to make the monthly payments without stretching yourself too thin, is a great way to increase the rate in which you build equity in your home, in addition to drastically reducing the amount of interest you pay over the life of the loan.

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2 Responses to “Mortgage Applications Rise as Interest Rates Fall”

  1. Jeff J. Says:

    How neutral and unbiased a source is the Mortgage Banker’s Association? I don’t know anything about them, but it sounds like they’re only going to release information that is good for mortgage bankers.

  2. richard Says:

    I admire your skepticism — it is important to always consider the source of any information, and whether or not there is an underlying bias. While the Mortgage Banker’s Association is an industry advocacy organization, and therefore inclined to put a rosy spin on the mortgage business, one value of looking at a data series compiled with a consistent methodology (such as the mortgage application index) is that you can draw your own conclusions from the numbers. It’s a bit like looking at the S&P 500 — no doubt Standard & Poors derives a lot of business from the health of the financial markets, but no one ever questions the objectivity of the S&P 500 as a stock index because it employs a consistent methodology over time. That’s not to say these indices don’t have built in tendencies based on how they are constructed — all indices do, whether it is mortgage applications, the S&P 500, or CPI. But that’s a far cry from the information being actively manipulated, so there is value in this information.

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