Homebuyers aren’t budging for low rates

10/24/2014

Homebuyers aren’t budging for low rates

NEW YORK – Oct. 23, 2014 – Mortgage rates have fallen to their lowest level in nearly 18 months, but mortgage applications for home purchases have fallen 5 percent week-to-week – and they're down about 9 percent from year-ago levels, according to the Mortgage Bankers Association (MBA).

The national average on the 30-year fixed-rate mortgage dropped to 4.10 percent last week to its lowest level since May 2013, according to MBA. Some lenders are even offering stellar credit borrowers rates below 4 percent.

Overall, MBA reports that mortgage applications rose 11.6 percent last week – but the rise was entirely driven by refinance applications, not applications for home purchases. Refinance applications surged 23 percent week-to-week to their highest level since November 2013.

But mortgage applications for home purchases continued to fall in the latest week.

"Mortgage rates have fallen close to 30 basis points over the last four weeks," says Mike Fratantoni, the MBA's chief economist." Continuing concerns about weak economic growth in Europe and a few U.S. economic indicators that came in below expectations caused a flight to quality into U.S. Treasurys last week, leading to sharp drops in interest rates."

But housing analysts say mortgage rates aren't sidelining potential buyers – credit availability is. Lenders have tightened credit requirements, requiring higher credit scores and downpayments that prevent many home shoppers from closing.

That may soon change. Mel Watt, director of the Federal Housing Finance Agency, announced Monday that the Fannie Mae and Freddie Mac regulator will soon be releasing rules to help ease overly tight credit standards.

"We have started to move mortgage finance back to a responsible state of normalcy – one that encourages responsible lending to creditworthy borrowers while maintaining safety and soundness of the enterprises," said Watt during the Mortgage Bankers Association's annual conference on Monday.

Source: "Slump in Mortgage Rates Fails to Rally Home Buyers," CNBC (Oct. 22, 2014)

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