Interest Rates Are Down Along With Mortgage Applications
(The housing market has been facing some tough times during the past few weeks, and the outlook seems to be more bad news by the day. )
One of the key indicators to the health of our housing and real estate industries is the status of the mortgage industry.
Since mortgages are required to finance the purchase of a house, if the mortgage industry is suffering and not doing well in sales, then the same can almost always be said for the housing industry.
One thing that has always been pretty consistent with the mortgage industry is that when interest rates are down, mortgage applications increase; but this was not the case when a report on the mortgage industry was released this week. This only brings more bad news in terms of the health and vitality of these important industries.
A September 27, 2006 article from Reuters and posted on CNNMoney.com, “Lower rates fail to lift demand for home loans,” discusses these new findings.
“U.S. mortgage applications fell for the first time in four weeks even as interest rates dropped to a six-month low, an industry trade group said Wednesday, providing further evidence the country's housing market slump is deepening.”
“The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and purchasing loans, for the week ended Sept. 22 decreased 4.9 percent to 566.6 from the previous week's 595.8, which was its highest level since April.”
All of this is in despite of the good news of lower interest rates, which are extremely welcome after the Federal Reserve raised rates a consecutive 17 times in a row this past summer.
Inflation seems to be under control, so the Fed has decided to lower rates, or at least stop raising them for the time being.
The most popular and traditional type of mortgage is the 30-year fixed-rate mortgage which averaged 6.18 percent this week, down .18 percentage point from the previous week.
Fixed-rate mortgages and adjustable-rate mortgages also saw a dip in their interest rates as well.
Fixed 15-year mortgage quote averaged 5.81 percent, down from 6.04. Rates on one-year adjustable-rate mortgages (ARMs) decreased to 5.90 from 5.95 percent. The ARM share of activity decreased to 26.4 percent of total applications from 27 percent the previous week.”
Overall, rates are sliding pretty dramatically, which should prompt an increase in mortgage activity, but this does not seem to be the case.
Interest rates in general were higher than average when compared to last year at 5.85 percent, but were down considerably from what they were in June at 6.86 percent.
“The MBA's seasonally adjusted purchase mortgage index, widely considered a timely gauge of U.S. home sales, fell 5.5 percent to 375.9. The index was also substantially below its year-ago level of 483.1.The group's seasonally adjusted index of refinancing applications decreased 4.1 percent to 1,677.5. The index stood at 2,106.6 a year earlier.”
