Saturday 16th of January 2021

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Mortgage Applications Up As Interest Rates Fall

The lowest interest rates in months caused U.S. consumers to push mortgage applications to their highest level since before summer began.

Rates on the most widely used mortgages, 30-year fixed-rate loans, were at a four-month low as they dipped under 5 percent for the third week in a row, according to the Mortgage Bankers Association. The rates averaged 4.89% , the lowest level since the week ended May 22. The record low of 4.61% was reported earlier this year in the week ended March 27.

At the new average for a 30-year rate, the monthly costs for each $100,000 borrowed would be $530. That’s about $68 less than the same period a year earlier when the average was 5.98%.

The seasonally adjusted index of mortgage applications that includes purchase and refinance loans jumped 16.4 to 756.3% for the week ended Oct. 2. That’s the highest level since the week through May 22.

For home purchases specifically, the association’s seasonally adjusted index climbed 13.2 to 306.1% – the highest since the week ending Jan. 2.

The seasonally adjusted index of refinancing applications jumped 18.2 percent to 3,377.1. That is the highest it’s been since the week that ended May 22. The portion of the applications for refinancing went up slightly from the week earlier to 66.3%. That’s still well below the high of 85.3% in the week that ended Jan. 9.

Refinancing is worthwhile if it results in a full percentage point rate reduction or a minimum of $100 savings for a monthly mortgage payment. That’s what makes rates going below 5 percent so significant.

The segment of the applications that were for adjustable-rate mortgages fell to 6.1 percent. The average rate for one-year adjustable rate mortgages was 6.56%. The rates for fixed 15-year mortgages averaged 4.32 percent.

The survey by the Washington-based association is done every week. Its information includes about half of all retail residential mortgage applications in the United States.

The housing market has struggled to recover from the worst economic downturn since the Great Depression. However, there have been signs of improvement as sales increase. In fact, home prices in some regions have increased while the price declines seen in other areas have moderated. Affordability and the federal $8,000 tax credit for first-time home buyers that’s included in the government’s $787 billion economic stimulus bill have combined with the lower mortgage rates to help the market.

There are still no guarantees for the long term when taking into consideration the tax credit ends Nov. 30 and many homes sold have been distressed. Some experts say prices could fall again as the market braces for another surge of foreclosures.