While it would seem that everyone would be moving to make a home purchase, current mortgage rates are bringing on more mortgage refinance activity than new loans. According to the Mortgage Bankers Association's Market Composite Index for the week ending July 20th, the Purchase Index showed that purchase applications dropped by 3% on an adjusted basis while the Refinance Index hit the highest level in over three years by increasing 2% on a seasonally adjusted basis.The mortgage refinance share of all loan applications was 81%. In line with this, the National Association of Realtors reported that Pending Home Sales fell 1.4% in June. While this is being attributed to low inventory, it very well could be caused by consumer sentiment which declined to 72.3 this month, the lowest level of the year, according to the Thomson Reuters/University of Michigan report. With so much financial trouble in Europe and a sluggish economy here in the U.S., consumers are staying put and refinancing to lower mortgage rates instead.
FreeRateUpdate.com's survey of wholesale and direct lenders shows that mortgage rates continued to remain steady this past week with 30 year fixed mortgage rates at 3.375%, 15 year fixed mortgage rates at 2.750% and 5/1 adjustable mortgage rates at 2.125%, all available with 0.7 to 1% origination fee provided borrowers have good credit and qualifications. With these rates, existing homeowners are lowing their monthly mortgage payments or terms of the loan to save money with some consumers refinancing several times. SinceHARP has been expanded, more underwater homeowners have been able to refinance, thus preventing default or foreclosure.
HARP, which is for mortgages sold to Fannie Mae or Freddie Mac prior to June 1, 2009, has been a life line for a large amount of homeowners. By taking advantage of the HARP program, these borrowers are able to gain equity back faster putting them in a better position to sell later on. Since HARP can be difficult to obtain in some circumstances, it is recommended to inquire online where a multitude of lenders are available and can be matched up to a borrower's information.
FHA mortgage rates have remained steady for quite some time along with other mortgage rates. Current FHA 30 year fixed mortgage rates are at 3.125%, FHA 15 year fixed mortgage rates are at 2.625% and FHA 5/1 adjustable mortgage rates are at 2.625%. Right now, FHA is seeing more activity for its refinance mortgages than for purchases since the expansion of the FHA streamline refinance. For FHA mortgages endorsed prior to June 1, 2009, FHA has reduced the upfront mortgage insurance premium to .01% and the annual mortgage insurance premium to .55%. By refinancing, there is an extreme amount of savings that FHA borrowers can obtain and with no cash out, there is no need for an appraisal or other documentation.
The normal upfront mortgage insurance premium and other FHA fees causes FHA closing costs (APR) to be higher than conforming mortgages whether for purchases or refinances. Now with this special reduction, borrowers are not hesitant to refinance as long as they can find a lender who will approve them. Many lenders are only accepting their current customers for this program causing much frustration for FHA homeowners. There are indeed lenders who will help any eligible borrower, but mostly likely, these lenders can only be found through an online resource.
Jumbo mortgage rates have been surprisingly stable for a number of weeks. After last week's stock market rally, jumbo 30 year mortgage rates increased by .125% and are now at 4.250%. Remaining the same, jumbo 15 year mortgage rates are at 3.125% and jumbo 5/1 adjustable mortgage rate are at 2.250%. These low jumbo mortgage rates are available with 0.7 to 1% origination fee for borrowers who have excellent credit. The jumbo mortgage market is slowly improving, with more lenders getting involved to take part in this risky, but profitable end of the business. High end borrowers normally have stable qualifications which lenders find attractive. As more jumbo mortgage offerings become available, borrowers should thoroughly search their options as they are faced with more competition and better mortgage terms.
MBS prices (mortgage backed securities), which move mortgage rates in the opposite directions, took a turn at the end of the last week which put mortgage rates at risk of rising. Stocks rallied for two days and rose quite a bit while MBS prices fell. Investors were looking at the statements from the President of the European Central Bank and his commitment to preserve the European Union. This week everything is turning around again as investors now await to see action from the ECB and possible additional stimulus from the Fed's. The Commerce Department reported that second quarter GDP increased at a 1.5% annual rates which was better than expected, but lower than the first quarter. June Durable Orders increased 1.6% from May which was also better than anticipated by analysts. Weekly jobless claims fell to 353,000 which was lower than expectations. While jobless claims is an important indicator, job creation is more important and affects markets in a stronger way.