By Mike Colpitts
All-time record low mortgage rates triggered a revival in applications for home financing. Both refinances and new home mortgage applications were up for the first time in three weeks as homeowners and home purchasers returned to the market in greater numbers.
Applications saw a large pick-up, despite the Labor Day holiday. The market composite index, a combination of both refinancing and new mortgage purchase applications rose 6.3% on a seasonally adjusted basis. Separately, purchase applications rose by 7%, while refinancing saw a 6% jump.
The Mortgage Bankers Association survey, which includes about half of all mortgage applications, saw the average 30-year fixed rate mortgage fall to 4.17% last week on fully executed contracts from 4.23% the previous week. Mortgage originators also reported a drop in the 15-year fixed rate loan to an average of 3.40% from 3.41% a week earlier. Interest rates this week are even lower.
The drop in mortgage rates offered by banks and mortgage lenders is attributed to a series of hard hitting economic issues, including record low Treasury bond rates, which slid to 1.877% Monday on the benchmark 10-year note.
The government sold $21 billion in 10-year notes Tuesday at a record low yield on concerns over Europe’s debt crisis crippling the region’s financial institutions. Bond rates fell as German Chancellor Angela Merkel said she won’t allow Greece to go into “uncontrolled insolvency.”
But even with the drop in rates, the demand for Treasuries was the highest since June as investors see the U.S. bonds as a safe haven for investing.
High unemployment levels and slow home sales also trouble financial markets, which have seen a yo-yo movement for weeks. However, applications for mortgage purchase applications saw a sharp increase for the week, rising 7% showing more buyers are finally applying for new home mortgages to finance purchases at record low interest rates.