Real Estate Market

Mortgage rates not low enough for housing consumers

6/11/10 - Mortgage interest rates have been at record levels for much of the year, but potential buyers and homeowners, who might otherwise refinance or tap their equity, just aren't cashing in.

Many of them simply can't.

The number of customers applying for a home purchase mortgage fell to the lowest level in 13 years last week, according to the Mortgage Bankers Association's (MBA) report for the week ending June 4.

Meanwhile, a day earlier, June 3, mortgage rates slid down to an average 4.79 percent for 30-year, conforming, fixed-rate mortgages, according to Freddie Mac's weekly Primary Mortgage Market Survey.

This week, ending June 10, the FRM slipped even more, to 4.72 percent, just a notch off the record low 4.71 percent set back on December 3, 2009. The 15-year FRM was in a four-week free fall and averaged 4.17 percent on June 10 -- the lowest its been since Freddie Mac started tracking it in August 1991.

You'd think mortgages would sell like hotcakes.

Instead, overall mortgage application volume, which includes loans for purchases and refinancings, sank by 12.2 percent during the week ending June 4, compared with the previous week.

Refinance volume tumbled 14.3 percent and the volume of mortgages originated to buy a home was down 5.7 percent last week, its lowest point since February 1997, the MBA reported this week.

Even with sellers slashing home prices the mortgage market is a dismal reflection of a housing market that can't hack it without the expired federal tax credit and other government incentives.

The MBA said purchase applications are 35 percent below their level of four weeks ago, when numbers included consumers cashing in on the tail end of the home buyer tax credit.

The refinance market is tapped out because many home owners traded in their mortgage late last year when rates dipped to record lows, said the MBA.

Other reasons consumers aren't buying lower rates include:

• Submersion. Homeowners can't refinance because they remain "underwater" on their mortgages and carry a mortgage balance that's bigger than the value of their home.

• Jobs. Unemployment remains near 10 percent. Enter, the new NINJA loan. No income. No Job. No approval.

• Credit issues. Credit scores have been damaged by unemployment, unaffordable interest resets on adjustable rate mortgages (ARMs), loan workouts, foreclosures and other distress on the home front.

• Stiffer qualifying requirements. While consumers are suffering lower credit scores and weaker financials, lenders are demanding higher scores and stronger personal asset profiles. Even if rates continue to dip, underwriting will write off many housing consumers.




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