Mortgage Applications Lowest Since 2000

 

Apr 30 2014, 7:55AM

 

The week ended April 25 was one of the slowest for mortgage application activity the industry has seen in years.  The Mortgage Bankers Association (MBA) said applications for both purchase mortgages and refinancing decreased and its Market Composite Index, a measure of overall mortgage applications volume, fell to its lowest level in almost 15 years.

 

The Composite decreased 5.9 percent on a seasonally adjusted basis from the week ended April 18 and was down 5 percent on a non-seasonally adjusted basis.  Refinancing activity fell 7 percent and purchase applications were off 4 percent from a week earlier on both a seasonally adjusted and an unadjusted basis and was 21 percent lower than during the same week in 2013.

 

Refinancing fell to exactly half of all mortgage applications from 51 percent the previous week.  This is the lowest share for refinancing since July 2009 and it is 13 percentage points below the level at the beginning of 2014.

 

Refinance Index vs 30 Yr Fixed

 

Purchase Index vs 30 Yr Fixed

 

“Both purchase and refinance application activity fell last week, and the market composite index is at its lowest level since December 2000,” said Mike Fratantoni, MBA’s Chief Economist. “Purchase applications decreased 4 percent over the week, and were 21 percent lower than a year ago. Refinance activity also continued to slide despite a 30-year fixed rate that was unchanged from the previous week. The refinance index dropped 7 percent to the lowest level since 2008, continuing the declining trend that we have seen since May 2013.”

 

Contract interest rates for fixed rate mortgages were lower or unchanged from the previous week while effective rates all decreased.  Interest rates for 5/1 adjustable rate mortgages did increase during the week with the average contract rate rising 10 basis points to 3.26 percent.  Points decreased to 0.35 from 0.36 and the effective rate decreased from the previous week.  Approximately 8 percent of mortgage applications were for the various adjustable rate products, essentially unchanged from the previous week.

 

The average contract interest rate for 30-year fixed-rate mortgages (FRM) with conforming loan balances of $417,000 or less was unchanged at 4.49 percent, with points decreasing to 0.38 from 0.50.  The average contract interest rate for jumbo 30-year fixed-rate mortgages with balances greater than $417,000 decreased to 4.37 percent from 4.41 percent, with points dropping to 0.14 from 0.34.

 

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 4.17 percent from 4.20 percent with points decreasing to 0.10 from 0.41 and the rate for 15-year fixed-rate mortgages decreased to 3.53 percent from 3.55 percent.  Points for the 15-year decreased to 0.31 from 0.33.

 

MBA’s data is derived from its Weekly Mortgage Applications Survey which it has conducted since 1990 and which covers over 75 percent of all U.S. retail residential mortgage applications.  Survey respondents include mortgage bankers, commercial banks and thrifts.  Interest rate information is based on loans with an 80 percent loan-to-value ratio and points include the origination fee.  Base period and value for all indexes is March 16, 1990=100.

 

Refinancing Mortgage: The Secret To Saving Thousands On Your Mortgage |

 

 

Have you conducted a home loan health check lately? You might be surprised if you find out that despite getting a pretty good loan back then, there is still some room for you to save. The solution does not lie on your current home loan. What you might want to do is try to look at what’s out there for you if you wish to find ways to reduce your monthly mortgage costs.

 

Mortgage

 

A lot of people today are actually dealing with higher interest rates, which mean they have to pay bigger interest payments. The situation is the perfect time to find a better deal in the market. And once the opportunity to refinance to a better mortgage product reveals itself, you don’t let it pass. However, you do need to consult with your lender or a separate mortgage expert regarding your situation. Refinancing mortgage, just like other home loan solutions, has advantages and disadvantages. Before you can refinance, you will have to deal with the refinancing costs which will be comprised most likely of exit fees and several other charges your lender might impose.

 

Benefits of Refinancing to a New Loan

 

Refinancing to a new loan has other advantages aside from the obvious fact that of allowing people to lower their mortgage costs. Refinancing loans allows you to use the equity stored in your home as guarantee for a new loan. You can use the loan to fund the renovation and of your property. You can also purchase an investment property if you want using the funds you get from the refinancing home loan. Last but not the least, refinancing allows you to easily consolidate your loans as well as unsecured debts (e.g. credit card and personal loan) into one so you won’t have to pay high interest rates. The best thing about debt consolidation is that it makes debt management easy because you only have to manage a single account.

 

You can take advantage of refinancing when the interest rates are down. Once you have secured a loan, you can lock it in fixed rate for 15 to 30 years in order to preserve the low interest rate. When the rates go up, you’ll be saving a lot compared to those with variable rate loans. However, refinancing to a variable rate loan is the better option if you are not permanently settling in your home.

 

Refinancing mortgage takes you back to step one when you first applied for a mortgage. And if you remember, you need to have a cautious approach because you do not want to defeat the purpose of your refinancing. Simply put it, it’s buying your first all over again, which means you might encounter the same obstacles and procedures.

By  Robert  Charlson

Fallout From Refinancing – NYTimes.com

 

 

Credit The New York Times

 

 

Homeowners who refinanced when fixed mortgage rates dropped below 4 percent will be less inclined to put their homes on the market as interest rates climb. And as a result, the limited property supply already impeding sales in many markets may not ease anytime soon.

A recent survey by Redfin, a national real estate brokerage based in Seattle, suggests that even those beneficiaries of low-refinance rates who do decide to move may want to make money renting out their homes while waiting for prices to rise, rather than sell right away.

Redfin questioned 1,900 people nationwide who said they planned to buy a home within a year; 42 percent said they already owned one, and of those, 39 percent said they planned to rent it out after they moved. The survey also asked buyers about their frustrations with the process, and “low inventory” topped the list.

 

 

Market dynamics are encouraging owners to keep their homes off the market for now, said Anthony Hsieh, the chief executive of loanDepot, a mortgage lender. “The rental market is very, very healthy today because a lot of Americans are locked out of the mortgage market,” he said. “And there is the promise that real estate is going to appreciate, because we’re just coming out of a deep recession.”

Of course, most borrowers can’t afford to buy another home without using equity from their first for a down payment. But Mr. Hsieh says that those who were able to take advantage of low refinance rates tend to be “premium consumers,” with very good credit and stable, above-average incomes.

“These are the folks that will think twice before they pay off that mortgage that is such cheap money,” he said. “They’re going to explore all types of options before they do that.”

They may want to consider a few other factors before taking on tenants, said Jed Kolko, the chief economist of Trulia, an online marketplace for residential real estate. First is the effort involved in managing a rental property. Second is the greater financial risk of owning two homes in the same market should home prices take a dive. And third is the changing nature of what’s driving rents.

“Over the past several years,” Mr. Kolko said, “the strong demand for renting single-family homes has been driven by people who lost homes to foreclosure but still wanted to stay in the same area. But now it is more driven by young people, and they are more urban focused.”

Patric H. Hendershott, a senior research fellow at the Institute for Housing Studies at DePaul University in Chicago, says he has witnessed the current allure of being a landlord firsthand. He lives in a housing community for older people, and he has recently noticed that residents who are moving to larger units are choosing to rent out their smaller ones.

But he views another scenario as more likely for low-rate holders: Those who can’t afford to move on without selling will essentially be “locked into” their homes. As interest rates rise, even buying another home at the same price will result in a higher mortgage payment.

In a recent analysis of the effect of lock-ins, Mr. Hendershott predicted that if rates continue to rise, the result will be substantial declines in housing turnover in strong housing markets, in which large numbers of households refinanced at low rates.

“We had a big episode of this in the 1980s,” he said, recalling when soaring interest rates locked in large numbers of homeowners.

Research cited in his analysis found that during that period, household mobility declined by 15 percent for every 2 percent increase in rates.

 

Refinances Seen Falling to 38 Percent Market Share in 2014

Feb 4 2014, 1:16PM

Homeowners who refinanced through Freddie Mac in 2013 continued to display fiscal restraint, choosing fixed rate mortgages, keeping essentially the same mortgage balance, and in many cases opting for shorter-term loans to build equity more rapidly.  In doing so homebuyers who refinanced during the year will save approximately $21 billion on net over the first 12 months of their new loans.

The results of Freddie Mac’s fourth quarter refinance analysis showed borrowers are continuing to take advantage of low rates, with the refinancing shaving an average of about 1.5 percentage points off of their old rate; or an average reduction of 25 percent.  On a $200,000 loan this translates into $3,000 in interest over 12 months.  Homeowners who refinanced through the Home Affordable Refinance Program (HARP) benefited from an average rate reduction of 1.7 percentage points and will save an average of $3,300 in interest during the first 12 months.

Thirty-nine percent of those who refinanced during the fourth quarter of 2013 shortened the term of their loan compared to 37 percent in the third quarter.  This was the highest percentage since 1992.  Homeowners who refinanced through HARP continued to take advantage of incentives offered by the program to shorten loan terms with 42 percent choosing to do so compared to 35 percent of those financing outside of HARP.  Only 5 percent of borrowers picked longer loan terms for their new loans.

Only $6.5 billion in net home equity was cashed out through refinancing in the fourth quarter compared to $7.1 billion in the third quarter.  . The peak in cash-out refinance volume was $84 billion during the second quarter of 2006. Another $6.1 billion was used to consolidate home equity loan balances into the first mortgage at the closing table.  About 83 percent of those who refinanced their first-lien home mortgage maintained about the same loan amount or lowered their principal balance by paying in additional money at the closing table. That’s just shy of the 88 percent peak during the second quarter of 2012.

During the entire year the total cash-out from refinancing was $32.1 billion compared to $320.5 billion during the 2006 peak.  Adjusted for inflation, annual cash-out volumes during 2010 through 2013 have been the smallest since 1997.

More than 95 percent of refinancing borrowers chose a fixed-rate loan. Fixed-rate loans were preferred regardless of what the original loan product had been. For example, 94 percent of borrowers who had a hybrid ARM refinanced into a fixed-rate loan during the fourth quarter. In contrast, only 3 percent of borrowers who had a fixed-rate loan chose an ARM.

The median age of a mortgage that was refinanced during the quarter increased to 7.0 years, the oldest median since Freddie Mac began its analysis.  The company said this reflected the duration of prevailing low interest rates; that is few homeowners who took out their mortgages within the last four year have much incentive to refinance.

Frank Nothaft, Freddie Mac vice president and chief economist said, “Our latest refinance report shows the refinance boom continued to wind down as the pool of potential borrowers declined and as mortgage rates increased during the second half of 2013. We are projecting the refinance share will be just 38 percent of all originations in 2014 as refinance falls off further and the emerging purchase market consumes a bigger piece of the pie.”

Freddie Mac’s refinance analysis is based on a sample of properties on which Freddie Mac has funded two successive conventional, first-mortgage loans with the latest being for refinance rather than for purchase. During the fourth quarter of 2014, the refinance share of applications averaged 56 percent in Freddie Mac’s monthly refinance survey, and the ARM share of applications was 10 percent in Freddie Mac’s monthly ARM survey, which includes purchase-money as well as refinance applications.