Refinancing Surges As Rates Tumble

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Demand for mortgage refinancing has hit its highest level in more than three years as mortgage rates continued to plunge in the wake of the Fed's announcement of a third round of economic stimulus.

Applications to refinance an existing mortgage jumped 20 percent last week, according to today's figures from the Mortgage Bankers Association (MBA). It was the strongest week for mortgage refinancing since April 2009.

The sharp rise in refinance demand comes as average rates on standard 30-year mortgages have fallen two-tenths of a percentage point since the Fed announced on Sept. 13 that it would undertake a third round of "qualitative easing."

Applications for home purchase mortgages increased as well, rising a seasonally adjusted 4 percent over the previous week and showing an 11 percent annual gain over the same week one year ago.

All rates reach new record lows

All five types of mortgage rates covered by the MBA survey fell to new all-time lows last week, led by standard 30-year fixed-rate loans, which fell to an average of 3.53 percent, down from 3.63 percent the week before. Prior to the Fed's announcement on Sept. 13, 30-year loans were averaging 3.75 percent in the MBA survey.

MBA economist Mike Fratantoni said the decision by the Federal Reserve to increase its purchases of mortgage-backed securities is putting downward pressure on mortgage rates. Similar action by the Fed triggered a flood of refinance applications in April 2009 when the first round of qualitative easing sent 30-year rates below the 5 percent mark for the first time in half a century.

Big drop in 15-year rates

Interest rates on 15-year fixed-rate mortgages, popular with those who are refinancing, also posted a big drop last week, falling to an average of 2.90 percent in the MBA survey, down from 2.98 percent the week before.

The average on 30-year FHA fixed-rate mortgages dropped to 3.37 percent, down from 3.44 percent previously, while 30-year fixed-rate jumbo mortgages (balances exceeding $417,500) fell to 3.82 percent, down from 3.87 percent the week before.

A small decline was seen in initial rates for 5/1 adjustable-rate mortgages (ARMs), which decreased to 2.59 percent, down from 2.61 percent the week before.

All rates are based on mortgages with an 80 percent loan-to-value ratio. The weekly MBA survey covers approximately three-quarters of the U.S. residential mortgage market.

First published at: http://www.mortgageloan.com/refinancing-surges-rates-tumble-9258

Have you taken out or refinanced a mortgage recently? What sort of rate did you get? Let us know at http://www.mortgageloan.com/Rates/map ! Your fellow borrowers will thank you!



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Personal Finance , Banking and Loans

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