The economy has been on the mind of the American people recently. The subprime mortgage crisis has led President Bush, Congress, Wall Street, and the Federal Reserve to attempt to find solutions to the current economic trough. The Fed stated this week that it would implement deep interest-rate cuts; an extraordinary step of cutting interest rates between policy meetings. Last week, President Bush announced a $145 billion stimulus package to give the economy a much needed boost. The economic growth package includes tax relief for the consumer and business. This positive stimulus news from Bush is followed up by the positive news from the Mortgage Bankers Association (MBA).
According to the Mortgage Bankers Association, mortgage application volume increased by 8.3 percent last week. The home loan mortgage arena has been littered with mortgage lenders and mortgage brokers profits and business being swept away in the subprime mortgages crisis. Herein, to protect their profits and maintain their mortgage lending business, mortgage lenders have tightened lending practices. So the news of a rise in mortgage applications was great news, as the opposite results would be expected in an environment of tightening credit markets.
The Mortgage Bankers Association application index jumped from 906.4 to 981.5. The applications for mortgage refinance stimulated the jump in the MBA index. The lower interest rates have led many homeowners into doing mortgage refinancing; thus mortgage refinance applications made up 66 percent of all applications last week.
This jump in applications parallels an increase in applications the first week of January 2008 when mortgage loan application volume jumped 32.2 percent, according to the Mortgage Bankers Association's (MBA) weekly mortgage application survey. The index had skyrocketed from 533.9 points to 706 points.
An application index value of 100 is equivalent to the application volume in mid March 1990; the first time MBA tracked application volume. Therefore, last week’s reading of 981.5 connotes application activity is 9.815 times greater than when the MBA initially started tracking the data.
The regular MBA survey gives a good snapshot of the mortgage loan lending industry which includes mortgage lender bankers, commercial banks, and thrifts.
As interest rates fell mortgage application volume rose. The traditional 30-year fixed rate mortgage average interest rates lowered to 5.49 percent from 5.62 percent. The 15-year fixed-rate mortgage average interest rates fell to 4.96 percent from 5.07 percent.
The majority of mortgage refinancing was due to conversions to fixed rate mortgages from adjustable rate mortgages. There is great anticipation about the lowered mortgage rates amongst real estate homebuyers. Many home buying consumers had been waiting on the sidelines for further lowering of home prices and interest rates. Hence, with the lower mortgage rates, it is a good time to buy house or to do a mortgage refinance.