A recent survey revealed that US mortgage applications surged as borrowing rates dipped to a record low.
The Mortgage Bankers Association (MBA) reported that the 30-year fixed-rate mortgage average fell to 4.17 percent from 4.23 percent, surpassing the previous low set in October 2010 at 4.21 percent.
Paul Dales, Senior Economist at Capital Economics, said, “The sharp fall in house prices and the still high unemployment rate have significantly reduced the ability and willingness of households to borrow.”
“Millions of households are missing out on the mortgage bargain of a lifetime because they do not have the credit score or down payment required to qualify for a new loan.”
The association noted that the index of mortgage application, including the demand for home purchasing and refinancing, climbed 6.3 percent as of 9 September compared to the prior week.
Refinancing remains dismal given the tighter credit requirements at banks and the fact that a majority of homeowners have mortgage debts greater than the value of their house.
According to CoreLogic, approximately 20 million homeowners, or 53 percent of loans, have equity in their homes and are paying 5.1 percent or more on their mortgages. Those paying more than 5.5 percent and six percent account for 36 percent and 17 percent of the loans respectively.
Sam Khater, Senior Economist at CoreLogic, noted that refinancing is ideal for homeowners with high rates. Thus, in a couple of years, they can recover the high upfront cost they need to pay to initiate their new loan.
The recent increase in refinancing was the result of the dramatic decline in interest rates since late July.
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