This week’s mortgage application data was a stunner. This data, released by
the Mortgage Bankers’ Association, showed that applications dropped by a whopping 13.5% last week. Most of the decline was from a decrease in refinances, which dropped an eye popping 20% over the week. This is one of the largest weekly declines we can remember. The Purchase Application Index, which was up nicely for the month of August, declined by 3%. While this is a modest decline, our antenna is up to see if this is a normal fluctuation or an early indication of weakness in housing. Refinances now make up 57% of all transactions, which is the lowest level since 2009. The Federal Reserve is meeting next week and odds are good that they will begin to taper purchases of mortgage-backed securities. In response to the recent financial crisis, the Federal Reserve introduced a host of new credit and liquidity programs in 2008 and 2009. The largest of the new programs ws the mortgage-backed securities purchase program. The effect of this program was a record low level of interest rates. By reducing the purchasing of mortgage backed securities, we can expect interest rates to rise. If you have not taken advantage of low interest rates then you might want to consider taking advantage while you can. Until next time!
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