February 4th, 2009 by Michael Oliver

Share This Post

US mortgage application activity rose in the last week of January, this reflects a jump in demand for home refinances and purchases. Even though interest rates are at their highest levels since early December it didn’t seem to hurt people wanting to get an application in with their mortgage company of choice to see what their options are. The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended Jan. 30 increased 8.6 percent to 795.4 after slumping 38.8 percent during the previous week.

Mortgage rates on a 30 year fixed (on average excluding fees) were at 5.28% that was up 0.06% from last week. Three weeks ago borrowers were able to receive a 30 year fixed rate at on average 4.89%. So to recap in three quick weeks mortgage rates have increased 0.39%, that’s a pretty decent increase for a 3 week span in mortgage rates. At 4.89% mortgage rates were the absolute lowest they have ever been since the MBA (Mortgage Bankers Association) started keeping tabs on the statistic since 1990.

For those wanting the rest of the story this is the article from cnbc.com going over all the statistics and helping to give professionals in the industries an idea what is occurring in the markets. I personally have seen (here in Tucson) demand start to show up, a lot of this is seasonal due to Tucson’s weather patterns, but a lot of it is also purely based upon affordability and buyers wanting to take advantage of an affordable housing market. First time buyers while the most pessimistic of the bunch have been moving into the market a little more then I have seen in several months as a number of of them have come to me for representation on their home purchase and also a coupe listings I have in the first time buyer price range have gone under contract in the past 3 weeks. This to me means that the first time buyers are starting to make their move into the market. A month or two ago none of this activity was really going on (at least in my business) however due to time of year and home prices being lowered to 2002-2003 levels and mortgage rates still hovering just over 5.0% buyers are (from what I have seen) stepping out to make their purchases now while there is a high amount of quality inventory at low prices.

In any event here is the rest of the article going over the Mortgage Bankers Association index on application activity and other insights into the current real estate marketplace nationwide:

John Lonski, chief economist at Moody’s Investors Service in New York, said the recent trend higher in mortgage rates is a setback for the U.S. housing market and not what the economy needs right now.
“In this environment, we cannot afford to have mortgage rates going up, especially because of how critical the stabilization of housing is to any steadying of the overall economy,” Lonski said on Tuesday.

“We cannot have a bottoming of the macro economy without first stabilizing home sales,” he said.

Indeed, enticing mortgage rates impacts demand. The National Association of Realtors said on Tuesday its Pending Home Sales Index, based on contracts signed in December, surged 6.3 percent to 87.7 in December, the first increase since August.

The index, a key gauge of future home sales activity, tracks signed, not closed, contracts, so it is influenced by changes in mortgage rates.

The MBA’s seasonally adjusted purchase index fell 11.2 percent to 261.4 in the latest week.

The four-week moving average of mortgage applications, which smooths the volatile weekly figures, was down 9.2 percent.

The Mortgage Bankers seasonally adjusted index of refinancing applications ,meanwhile, jumped 15.8 percent to 3,906.3.

Mortgage Rates Up

The U.S. housing market is in the worst downturn since the Great Depression and its impact has rippled through the recession-hit economy, as well as the rest of the world.

Economists contend that the economy might not emerge from its slump unless the housing market stabilizes.

“Extraordinarily low mortgage yields are absolutely necessary to compensate potential home buyers for home price deflation risk and heightened unemployment risk,” Lonski said. “That will probably require more intervention from the government.”

The recent rise in mortgage rates can be tied to U.S. Treasury yields, which are linked to mortgage rates.

Treasury yields have risen sharply on fears over surging debt issuance to fund a ballooning budget gap and an array of government rescue programs.

Prior to the recent rise, 30-year mortgage rates had mostly been on a downward trend ever since the Federal Reserve unveiled a plan in late November to buy as much as $500 billion of mortgage securities backed by Fannie Mae ,Freddie Mac and Ginnie Mae.

The program also entails buying up to $100 billion of debt issued by the Federal Home Loan Banks.

The adjustable-rate mortgage share of activity decreased to 2.1 percent in the latest week, down from 2.4 percent the previous week.

Fixed 15-year mortgage rates averaged 5.15 percent, up from 4.98 percent the previous week.

Rates on one-year ARMs increased to 6.09 percent from 5.96 percent.