The low mortgage rates simply don’t seem to be enough to encourage new homebuyers and refinancers to take the plunge. According to reports, the number of mortgage applications that were filed last week were lower than the previous week, which is the lowest level they have been since the first part of August. This is just one of the symptoms of a flailing housing market with problems that never seem to end.
While it may seem like I am reporting only gloom and doom figures, the numbers simply do not lie. For the week that ended on September 10, applications for mortgage refinances and new mortgages were down by almost 9 percent. Typically, the monthly averages look better than the single week figures, but the four-week average for applications is still down by almost one percent. Refinance applications alone were down more than 10 percent which is the worst news of the story because refinancing has always been popular as it gives homeowners more money in their pocket that they can use to go on a vacation, improve their home or pay off debt. This extra spending goes into the economy which helps revitalize the shaky platform on which it currently sits, but there isn’t a lot of extra spending going on these days.
One of the reasons that the number of applications for refinancing has dropped is because many people who would refinance are underwater on their mortgages. This basically disqualifies them from refinancing because they have no equity to bring to the table. Unfortunately, it also prevents many homeowners from selling their home because they cannot afford to make up the difference that they owe once they sell at a fair market value.
The good news is that mortgage rates continue to stay low in this volatile market. Rates for a 30-year fixed-mortgage are averaging around 4.47 percent, which is a 0.03 percent drop from last week. Rates for a 15-year fixed mortgage have dropped to an average of 3.96 percent, which is a 0.04 percent decline from the previous week. Yet housing sales have been in a slump since the tax credit expired at the end of April and the low mortgage rates simply have not been enough to keep the sales going.
So what is the answer? It seems that the bad things that are happening in the mortgage industry are offsetting the good things. The low mortgage rates are offset by stricter guidelines and negative equity for one thing. Hopefully things can straighten out soon and all aspects of the housing industry can work for the betterment of the economy and for individual homeowners.
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