Refinancing takes control of the mortgage world
The new real estate market has been producing short and long term trends. As the old booming market experienced from 2000 to 2005 has officially ended, the industry has been seeking a new trend to market and generate funds.
A buyer’s market is finally emerging after home prices recently marked their first decline in over a decade. This directly coincides with record-breaking sales decreases. But the big talk in the market industry all summer long was mortgage interest rates.
Rates almost hit 7.0 percent at the end of August, after 17 consecutive increases from the Federal Reserve. Since then, rates have been slowly but steadily declining, leading many home owners to opt for a refinancing on their current mortgage.
The article, “Refinancing Last Week Made Up Nearly Half Of All Mortgage Applications” released in the October 6, 2006 edition of Realty Times, explains how lower mortgage rates are creating a new trend of mortgage deals.
“Freddie Mac today released the results of its Primary Mortgage Market Survey (PMMS) in which the 30-year fixed-rate mortgage (FRM) averaged 6.30 percent with an average 0.3 point for the week ending October 5, 2006, down very slightly from last week when it averaged 6.31 percent. Last year at this time, the 30-year FRM averaged 5.98 percent. This is the lowest the 30-year FRM has been since the week of March 2, 2006, when it averaged 6.24 percent.”
“The 15-year FRM this week averaged 5.98 percent, which ‘is the lowest the 15-year FRM has been since the week ending March 23, 2006, when it averaged 5.97 percent.’”
Although mortgage rates have barely decreased, the industry is gaining some much needed buzz, which has resulted in more refinancing deals. Many mortgage borrowers are also choosing to refinance because they fear that rates will rise again in the near future due to the overall declining status of the housing market.
“‘Mortgage rates fell to a six-month low this past week, and, not surprisingly, home refinancing rose 18 percent last week, accounting for almost half of all mortgage applications,’ said Frank Nothaft, Freddie Mac vice president and chief economist. ‘This is due both to the recent decline in mortgage rates and to homeowners who are refinancing ARMs rather than waiting for them to reset in the future when rates may be higher.’”
This increase in mortgage refinancing comes at a critical time when mortgage companies need productivity as their other services have been falling. The industry is hoping that the lower home prices will eventually lead to more conventional mortgage applications, but this may take a while.
“‘Even though rates have fallen recently, housing activity continues to slow while new construction wanes, leading Fed Chairman Bernanke to expect that the national economic rate of growth will lose up to one full percentage point in the last half of this year.”
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