Mortgage Pace Slows Before Boom

By Mike Colpitts

Despite the second lowest mortgage rates on record, refinances rates slowed to the slowest pace in weeks as consumers waited for new guidelines for home refinancing to be announced. Applications for refinancing slipped, driving home loan originations 10% lower, according to the Mortgage Bankers Association but are projected to boom this week.

The refinance share of applications fell 12.2%, but is expected to pick-up this week after Fannie Mae and Freddie Mac released details on their revamped Home Affordable Modification Program (HAMP) for consumers to refinance.

Refinance applications fell to compose 77.3% of total mortgage applications from 78.6% the previous week. Mortgage rates are at the second lowest level in U.S. history. The average fixed rate 30-year mortgage was 3.99% last week, according to Freddie Mac.

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However, rates on conventional loans that were fully executed by borrowers were slightly higher, averaging 4.23%, according to the bankers’ survey. The disparity between the bankers survey and Freddie Mac rates offered to consumers maybe based on FICO scores. Higher credit scores enable purchasers of home mortgages to obtain the lowest available rates. Consumers with lower FICO scores are only able to get mortgages with higher rates set by banks and mortgage lenders.

The MBAA survey accounts for about 75% of all home loan applications across the U.S. Jumbo mortgages with loan balances greater than $417,500 averaged 4.56%. The average mortgage rate for a 15-year fixed rate loan remained unchanged for the week at 3.54%.

In October, slightly more than half (50.6%) of all refinancing applications were for fixed 30-year mortgages. More than a quarter of applications or 28.8% were for fixed 15-year rate loans, while only 6% were for adjustable rate mortgages.

The shorter term 15-year fixed rate mortgages were at their second highest level since the survey was taken in its current form the beginning of this year. Applications for fixed 30-year mortgages remained the highest sold loan for home purchases, making up 85.5% of mortgages sold to home buyers.