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With mortgage rates continuing to fall it has many borrowers finally making the move to purchase a home. Home loan purchase applications soared 24% for the week ending Jan. 9. With 30 fixed loan rates at a low 3.66% makes buying a home more enticing as well as affordable. Even people who have refinanced in the last year are thinking of doing it again too. Refinancing applications jumped 66%. For now, borrowers are taking advantage of the low rates.
Falling mortgage rates spur surge in home loan applications
Given the weakness in global economies, mortgage rates are likely to
stay low for the near future, experts say. That should help spur home
sales by making housing more affordable. Above, a home for sale in
Alameda, Calif., in July. (Ben Margot, Associated Press)
By Andrew Khouri ; January 18, 2015
Mortgage rates keep falling, and that has borrowers rushing to close a deal.
Applications
for home loans soared 49% for the week ended Jan. 9, according to the
Mortgage Bankers Assn., the largest pop since 2008. The jump from a week
earlier came from a 66% increase in refinances, and a 24% gain in
purchase applications.
And the surge could continue. Mortgage
finance giant Freddie Mac said lenders on average were offering a
30-year fixed loan at 3.66% last week, compared with 3.73% a week
earlier, and 4.41% from the same time last year.
"Our business is exploding," said Jeff Lazerson, president of the
Mortgage Grader brokerage in Laguna Niguel. "We can't write deals fast
enough."
The mortgage rate decline has defied forecasts. The
average on a 30-year fixed loan ended 2014 at 3.87%, a far cry from the
5% many experts predicted. Concerns over slowing economies overseas have
caused investors to rush into safer U.S. Treasury securities and
government-backed mortgage bonds, which has put downward pressure on
mortgage rates.
The
rates over the last two weeks were the lowest since May 2013, when they
started to rise and choked off a refinance boom. The latest drop in
rates has led to a boom in applications once again, local mortgage
professionals say. Two weeks ago — the latest data available — the
volume of applications was the most since August 2013.
"A lot of
people who refinanced in the past year are calling again," said Richard
T. Cirelli, head of RTC Mortgage Corp. in Laguna Beach. "So far it looks
like a very good year for people refinancing, as well as people that
are buying."
Given the weakness in global economies, mortgage rates are likely to
stay low for the near future, said Stuart Gabriel, director of UCLA's
Ziman Center for Real Estate. That should help spur home sales by making
housing more affordable, he said.
"There is very low probability of rising mortgage rates in the very near future," he said.
Many
industry leaders, including the Mortgage Bankers Assn., have predicted
rates on a 30-year-fixed loan to climb to about 5% by the end of 2015 as
the U.S. economy improves and the Federal Reserve makes an expected
increase to its short-term interest rates.
However, those predictions came before the most recent drop-off in
mortgage rates amid increasing concerns with economies abroad. Although
the U.S. economy appears to be strengthening, Asia and Europe have been
struggling with lackluster growth.
"It is very difficult to conjure up a scenario of 5% any time this calendar year," Gabriel said.
But
as the U.S. economy improves, rates could trend higher, though not
significantly, said Keith Gumbinger, vice president of HSH.com, which
tracks mortgage rates.
"We started 2014 in the 4.6% range. It may be a struggle to even get to that level this year," he said.
But even if rates stay low, it's uncertain if there will be a continued surge in applications.
Guy
Cecala, publisher of Inside Mortgage Finance, said many homeowners have
already refinanced in recent years, limiting the number of people who
would benefit from low rates. He added that low rates don't spur
purchases as much as other factors, such as income or wage growth.
"I
don't think there is any question it's going to spur refinance and home
purchase activity," he said. "It's just a question of how much."
In
December, the nation posted solid job growth, making 2014 the best year
for hiring since 1999. However, wage growth — a stubbornly lacking part
of the economic recovery — was missing. Average hourly earnings for all
private-sector workers fell 5 cents from November.
For now, however, borrowers are looking to take advantage of low rates that many thought were history.
One of those is Gary Lynch.
The
33-year-old utility worker started looking for a house in December
after a hiatus of several months, in large part because of the cheaper
cost of borrowing. He said he now feels a sense of urgency and had
planned a busy Saturday with his wife in the Temecula area, where he
lives.
"We are going to be looking at 30 different houses," he said.
Source:
http://www.latimes.com/business/la-fi-mortgage-applications-20150118-story.html
