Impact on the Mortgage Applications – Big Gains In 6 Years

 

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Recent activity indicates a sharp drop in the interest rates for all popular mortgage products and is backed by a huge spike in number of mortgage applications.

As per the weekly survey conducted by the Mortgage Bankers Association (MBA) on January 9, 2015 – the overall volume soared up by 49.1% compared to the data a week earlier . This jump had been the outcome of seasonally amended 66% rise in the refinance applications since July, 2013. Surprisingly, the refinance applications for fixed jumbo loans susceptible to interest rates increased over four-fold times.

Loan applications for buying a home showed an increase of 24% on a seasonal basis and have increased to 2% higher the previous year which is the first gain annually within a year. The MBA further reported that 3% down payment housing loan option from Fannie Mae for the borrowers with good credit scores had contributed to the increase.

FHA (Federal Housing Administration) loan insures loans to the borrowers with low down payments i.e. 3.5%. The recent decrease in FHA premiums by ½ percentage point won’t be into effect till January 26, 2015 however the borrowers have the chance to reapply on 26th thereby cancelling their present case numbers. This further implies if the borrowers opt for this low rate presently, they can enjoy the benefit of the reduced premium rates later on.

To this Brian Sullivan, a spokesperson for the “Department of Housing and Urban Development” said that it won’t cost anything to cancel as well as reapply.

The mortgage refinancing share had shown an increase of 71% of the total loan applications up from 65%  the last week – reported MBA. New FHA premium rates are expected to soar up the share higher and allow significant new business for the lenders although quick spike in the business can make lenders to increase the interest rates higher.

30-Year Fixed Rate Mortgage Average

Notes:
Freddie Mac, 30-Year Fixed Rate Mortgage Average in the United States© [MORTGAGE30US], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/MORTGAGE30US/, January 27, 2015.

15-Year Fixed Rate Mortgage Average

Notes:
Freddie Mac, 15-Year Fixed Rate Mortgage Average in the United States© [MORTGAGE15US], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/MORTGAGE15US/, January 27, 2015.

5/1-Year Adjustable Rate Mortgage Average

Notes:

Freddie Mac, 5/1-Year Adjustable Rate Mortgage Average in the United States© [MORTGAGE5US], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/MORTGAGE5US/, January 26, 2015.

Mortgage Applications Data


source: tradingeconomics.com

Notes :

The chart indicates weekly % increases/decreases as compared to last week.
Anything over 0 means applications increase as compared to previous week.
The entire month of January 2014,applications are rising week over week.

Interest rates have dropped consistently indicating rising mortgage applications

Mortgage Debt Outstanding, All holders

Notes:
Board of Governors of the Federal Reserve System (US), Mortgage Debt Outstanding, All holders [MDOAH], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/MDOAH/, January 21, 2015.

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