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April 10th, 2013

Borrowers react to lower rates and higher costs

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Refi ApplicationRates on the most popular types of mortgages declined, with 30-year fixed rates sliding nearly a tenth of a percentage point to their lowest level since mid-January, according to HSH.com’s Weekly Mortgage Rates Radar. The average rate for conforming 30-year fixed-rate mortgages fell by nine basis points (0.09 percent) to 3.59 percent. Conforming 5/1 Hybrid ARM rates decreased by three basis points, closing the Wednesday-to-Tuesday wraparound weekly survey at an average of 2.62 percent.

“The March employment report was far weaker than expected, with just 88,000 new hires,” said Keith Gumbinger, vice president of HSH.com. “This raises concerns that the economy is losing traction as spring unfolds, perhaps following the same pattern seen over the last two years.”

During 2011 and 2012, spurts of growth and hiring petered out, leaving the economy sputtering and in need of additional stimulus.

“The Federal Reserve has only recently been discussing how and when to begin removing or changing the Treasury and Mortgage-Backed Securities purchase programs it is using to goose the economy,” adds Gumbinger. “The weaker the economy remains, especially job growth, the longer these programs will continue to keep interest rates and mortgage rates low, but changes aren’t expected until later this year at the earliest.”

Refinancing still has some legs

Refinancing homeowners have taken advantage of the recent dip in mortgage rates, reported the Mortgage Bankers Association. Overall applications—including purchase and refinance—were up 4.5 percent for the week ending April 5. The refinance share of activity rose 6.3 percent, while purchase applications fell 1.3 percent.

Last week, the MBA reported a significant boost in purchase activity, something Mike Fratantoni, the MBA’s vice president of research and economics, attributed to the pending FHA cost increases. This week, Fratantoni said the MBA reported a 14 percent decline in government purchase applications following the increase. However, conventional purchase applications were up 5 percent for the week.

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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