By Kevin Chiu
Refinancing mortgages leaped to a new high as homeowners came out in force to obtain lower mortgage rates prompted by the recently introduced Obama administration refinance program, according to the Mortgage Bankers Association. The jump in loan applications came as borrowing costs hit record low rates.
Refinances saw a leap of 26.4% for the week ending Jan. 13th, which was the second straight week of rising applications. The market composite index, a measure that combines both refinances and new purchase applications were up by 23.1%.
A new refinancing program that went into effect shortly before the holiday season, offered by the Obama administration is intended to allow underwater homeowners to refinance at lower rates. The purchase index, however, also rose by 10.3% for the week.
“Interest rates dropped last week due to continuing anxieties regarding the fragile economic situation in Europe,” said MBA Vice President of Research and Economics Michael Fratantoni. “With mortgage rates reaching new lows, refinance volume jumped and MBA’s refinance index reached its highest level in the last six months. Purchase activity also increased as buyers returned to the market after the holiday season.”
The 30-year fixed rate loan that has been fully executed by new borrowers dropped to 4.06% from 4.11% for the week, according to the bankers’ survey that accounts for three-quarters of all U.S. home mortgages. It’s the lowest the benchmark rate has reached in the history of the survey.
The average contract interest rate on the shorter term 15-year fixed-rate loan also declined to 3.33% from 3.40 percent from one week ago. The rate for 5/1 adjustable rate mortgages remained unchanged with an average of 2.90%.
Treasury bond yields were at their lowest record in at least three years to keep the lid on rates, which should remain low for sometime. But whether they move lower is a consistent question even among financial analysts.