Wednesday, December 03, 2008

Mortgage Applications Surged By Record Amount

NEW YORK (Reuters) - Mortgage applications surged by the largest amount on record last week as a new Federal Reserve program pushed interest rates down to their lowest level in more than 3 years, data from an industry group showed on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended November 28 soared a record 112.1% to 857.7, the highest reading since the week ended March 21 when it reached 965.9.

Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 5.47%, down a whopping 0.52% from the previous week, the largest drop since 1990 when the MBA started conducting the weekly survey (see chart above).

Interest rates are at their lowest level since the week ended June 24, 2005, when they reached the same level. Interest rates are sharply below the peak of 6.59% reached during the summer, but only slightly below the 2008 low of 5.49% in January, according to the trade group.

HT: Ben Cunningham

7 Comments:

At 12/03/2008 6:31 PM, Blogger misterjosh said...

I wonder what happens when a mortgage in a mortgage backed security gets paid off. I imagine somebody in the financial industry gets a bonus.

They get a bonus for everything else! ;)

 
At 12/03/2008 6:58 PM, Blogger wcw said...

No, mj, that's prepayment, and prepayment is bad. Imagine you buy a nice 5-year CD from your bank. Next month, they give you one month's interest and return your principal. Why would you like that?

 
At 12/03/2008 7:42 PM, Blogger BDHumbert said...

I may be stupid - no take that back - I am stupid - but what would it cost to do the following...

1. Tell the mortgage holders they can lock in their rates at 6% for 30 years on their sub-prime loans - and if they do...

2. The government will pay the difference between 6% and 4.5%.

3. The consumer gets a lower payment and some relief for extending the term to 30 years in most cases - and a chance to stay in their home (but they lose some of their interest deduction since it is base on the 4.5% rate...

4. Without getting too crazy I can imagine a similar program for property taxes - if they roll back taxes 15% - the Feds cover 2/3 of this - but if more people are then able to stay in their homes the community does not lose the 5% gap since they should have more properties on the tax roles.

Wouldn't this "fix" a lot of the problem - avoid all the nasty costs of foreclosure etc...

What am I missing?

 
At 12/03/2008 8:40 PM, Blogger ExDemocrat said...

With all due respect, I believe your headline to be somewhat misleading. It was a record "surge" in mortgage applications, not a record in mortgage applications. And there is also quite a bit of discussion regarding percentage of refinances, how many were previous applications that were canceled and re-applied for due to rate decrease, etc.

I don't mean to be negative, just accurate.

 
At 12/04/2008 2:38 AM, Anonymous poor boomer said...

wcw said:

No, mj, that's prepayment, and prepayment is bad. Imagine you buy a nice 5-year CD from your bank. Next month, they give you one month's interest and return your principal. Why would you like that?


Subprime borrowers pay a risk premium in the form of higher rates and fees.

So one might EXPECT that in a (market-perceived) high-risk transaction, prepayment (and the certainty of getting your money back) would be a good thing, but NOOOOOOO, it's seen as a bad thing.

WTF is up with that? How can a subprime borrower avoid getting hosed right from the start?

Being poor is expensive.

 
At 12/04/2008 9:58 AM, Anonymous Anonymous said...

"What am I missing?"

Someone must pay for these subsidies.

 
At 12/04/2008 6:13 PM, Anonymous poor boomer said...

If demand for something (mortgages) exceeds supply, shouldn't prices increase?

 

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