Mortgage Rate Declines Lead to Increased Applications

Demand for purchase and refinance mortgages have risen from their historic lows on the strength of lower interest rates

A proverb advises, "Money grows on the tree of patience." Undoubtedly, anyone who's interested in buying a home, or refinancing her existing one, knows a thing or two about patience. The good news is that those who've been waiting for the right time to finance may finally be rewarded-with lower mortgage rates.

It's been a bad year for mortgage lenders. They're facing big losses and mounting foreclosures. Many would-be homebuyers and existing homeowners have given up on the prospect of getting a purchase or refinance mortgage-which has led to a dramatic year-over-year decline in mortgage applications.

Hope springs eternal

In this context, it only takes a small sign to foster hope for a recovery. That harbinger arrived when the Mortgage Bankers Association (MBA) released its index of mortgage applications for the week ended November 7. (The MBA index is calculated from a weekly survey that covers roughly half of all retail residential mortgage loan applications in the U.S.) The index rose 12 percent, from 379.9 in the prior week to 425, indicating that more people are in the market for mortgage financing.

Analysts believe that the increase is related to a decline in mortgage rates. The average rate on a 30-year, fixed-rate mortgage with a loan-to-value ratio of 80 percent was 6.47 percent in the prior week, but dropped 23 basis points to 6.24 percent. That change results in a savings of about $15 per month for every $100,000 financed.

The MBA's numbers suggest that most of the demand is coming from existing homeowners who are interested in refinancing. The association's refinancing index jumped 16 percent to 1248.4, pushing the percentage of refinance applications to 45.1 percent of total mortgage applications. The purchase index increased also, but by a lesser percentage, from 260.9 up to 284.4.

While the demand figures were up from the prior week, they're still down significantly relative to the same week last year.

A step in the right direction

The modest uptick in demand for mortgage loans isn't cause for celebration just yet. It's definitely a move in the right direction, but it would be more encouraging to see the demand for purchase mortgages increase faster. Increases in home sales, along with a slowdown in foreclosures, are the prerequisites for a housing market recovery. Naturally, before people can start buying homes again, they need to be able to obtain financing. Of course, the MBA index only tracks mortgages applied for, not mortgages funded. But if demand increases significantly, lenders may be compelled to get back to the business of making mortgage loans.

Patience is the virtue that will ultimately get us through to the other side of this housing crisis. Perhaps further rate declines, combined with low housing prices, will finally be enough to scare up some housing demand.

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Tips to Get Low Rates for Mortgage Refinance

First of all, let's define the term, shall we? Mortgage refinance rates are the lowest rates, homeowners can get when trying to refinance their mortgages. Simple, isn't it? Maybe so, but obtaining the very best mortgage refinance rate may prove to be a little more difficult. You see, mortgage refinance rates can vary a lot depending on your credit rating.


Customers with outstanding credit will be eligible for the best rates when refinancing their home mortgages, while people with poor credit will end up paying higher interest rates. This is why it is very important for you to seriously consider if refinancing your mortgage is indeed your best choice. In fact, there seems to be a consensus among experts on the fact that homeowners should only consider this option when the mortgage refinance rate is at least two points lower than their current interest rate.

One more thing to consider is that there are many mortgage lenders out there, including banks and all sorts of mortgage loan companies and associations. Therefore, you should spend some time carefully selecting that you will be doing business with, particularly since you are prone to encounter the good the bad and the ugly while shopping around. Some lenders will go as far as waiving all sorts of fees and closing costs in order to attract potential customers. Mortgage refinance rates under these conditions, however, are usually higher and many homeowners don't realize this until it is too late. Once again, patience and listening to those who have already been where you are now will be your best friends.

Also, there are now a myriad of resources online that will allow you to get a free quote for any kind of situation. All you need to do is go to one of the many sites around the web dealing with these matters and fill out a short survey. That's it. As soon as you provide all the answers you are requested you will receive a report with the best options available to you. Refinance mortgage rates depend upon your credit rating - as stated above - but also upon your history regarding mortgage payments, the amount subject to refinancing and your employment status at the time. Even then, there are both a minimum and a maximum for a mortgage refinance rate. All of these factors are taken into account when determining the rate applicable to each individual customer, making the process no easy task. Once again, consulting with a specialist on the subject is always your best choice.

The final point to consider while dealing with mortgage refinance rates is that they can vary quite a bit in a fluctuating economy. That being said, and even when interest rates may not be at all time lows, being able to refinance your mortgage may prove to be very beneficial for you. Lowering your monthly payments can free an important amount of money for years to come, which you can use to improve your lifestyle and financial well-being. In fact, mortgage refinance rates can become one of your smartest financial moves.