Wednesday, January 23, 2008

Lower Mortgage Rates, More Refi Applications

by Calculated Risk on 1/23/2008 04:25:00 PM

Mathew Padilla at the O.C. Register notes: Mortgage rates near ‘historic lows’

Al Hensling, president of brokerage United American Mortgage in Irvine, said lenders were offering rates as low as 5% on Tuesday for a 30-year fixed mortgage with a one-point fee. That’s for a conforming loan, which is up to $417,000.

“We are nearing historic lows on these rates,” Hensling said.

He said a 30-year fixed jumbo, which is greater than $417,000, with a one-point fee was available Tuesday as low as 6.125%. Lenders are more comfortable with jumbos fixed for shorter periods, he said. Thus, the lowest rate on a jumbo fixed for just five years was 4.875% and for seven years 5.125%. Both are quoted with a one-point fee.
And from the MBA: Refinancing Drives Increase In Mortgage Applications In Latest MBA Weekly Survey
“Refinance applications are up 92% since the beginning of November and purchase applications are up 7%. With tighter credit conditions we do not know how many of these applications will become loans, but it is clear that borrowers are responding to the 40-80 basis point drop in rates we have seen since November 2 across products," said Jay Brinkmann, Vice President of Research and Economics at the Mortgage Bankers Association.
First, note the rate disparity between 30 year loans for less than the conforming limit, and jumbos (5% vs. 6.125% according to one mortgage broker). For many, Freddie and Fannie are the only game in town.

And on the MBA data, this is just for applications, not loans. Still, lower rates has to help some homeowners lower their monthly payments (probably homeowners with low LTV and excellent credit). But lower rates won't stop the slide in house prices; the coming house price declines are inevitable.