Sunday 24th of January 2021

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Low Interest Rates Push Mortgage Applications Higher

Home shoppers grabbing the lowest interest rates in some time caused applications for mortgages in the United States to jump to their highest levels in three months, according to the Mortgage Bankers Association. The action was welcome relief for a battered housing market and gave hope that it is becoming more stable.

Homeowners looking to refinance were part of the reason for the surge. Also, applications from people wanting to buy homes – an early sign of upcoming sales – climbed to its highest number since January. The Association’s seasonally adjusted index of mortgage applications increased 17 percent in the week ending Sept. 4. The index includes both refinance and purchase loans.

Also the group’s seasonally adjusted index of applications for refinancing jumped 22.5 percent to 2,651.2, the largest increase since mid-March. The index also was its highest since the week that ended May 29.

The borrowing costs on 30-year, fixed-rate mortgages minus fees was an average of 5.02 percent. That is lowest level since the week that ended May 22 and well below the 6.06 percent rate reported a year ago. That new rate, however, still is above the all-time low of 4.61 percent that was reported in the week ending March 27.

Fixed 15-year mortgage rates averaged 4.45 percent, a decrease of 4.57 percent from the week earlier. One-year ARMs rates dropped to 6.69 percent from 6.71 percent.

In other news, the total of U.S. homeowners who are taking advantage of the loan modification allowed in the federal government’s Home Affordable Modification Program rose by about a third in August. Housing Administration Commissioner Dave Stevens said Wednesday that about 360,000 people with mortgages had their monthly payments reduced. Last month the U.S. Treasury Department reported the total was closer to 230,000.

Stevens said the total number of loan modification offers made since the program was first announced in February is more than 571,000. Curtailing a record number of residential foreclosures is seen as a critical component for an economic recovery. Members of the Obama administration earlier had expressed frustration over earlier reports of too few home mortgages being modified.

In the program, mortgage lenders are awarded $1,000 for each modification they finalize and additional cash for an additional three years as long as the borrower remains current on payments.

In his testimony before a congressional committee, Stevens said the administration has begun a “high level review” of the efforts to revive the housing industry and also is considering “programmatic options” in a bid to maintain the stability that is occurring in the home market.

Housing in the United States has experienced the worst drop since the Great Depression and its impact has rippled through the nation’s economy, as well as the rest of the globe. But there have been some indicators the situation is improving, with sales increasing and home price decreasing in some U.S. regions. Some sectors have even reported price increases.