Mortgage Applications Up Nearly 5 Percent as Florida Home Loan Costs Fall
U.S. mortgage applications rose for the first time in four weeks as long-term home loan rates plunged to their lowest levels since March, data from one of the industry’s main trade groups, the Mortgage Bankers Association (MBAA) showed Thursday.
News that the Federal Reserve is, at least temporarily, calling off its campaign to raise interest rates means good news for those seeking lower home loan rates. It clearly helped revitalize the Florida mortgage market over this past week, with seasonally adjusted home loan applications for the week ending August 4 rose a substantial 4.9 percent to 553.3, up from the previous week’s 527.6.
The MBAA also reports that costs on 30-year fixed-rate Florida home loans last week averaged 6.45 percent, down 0.17 percent from the 6.62 percent posted the previous week, and the lowest since the week ending March 24. Last week’s rate is 0.41 percentage point below the four-year high, which was reached in mid-June, for the industry’s benchmark loan.
This trend was met with much optimism by industry experts and researchers.
“The worst of the housing market is behind us. That’s simply because the two primary drivers of housing — interest rates and demographics — are improving.” said Richard Yamarone, Chief Economist at Argus Research in New York, before the MBAA data was published.
The Florida and U.S. housing market as a whole have stumbled since last year as rising interest rates slowed demand for homes, resulting in burgeoning inventories and slower home price appreciation across the country. With rates having gone up more than a full percentage point, more people are finding it harder to buy homes, making the recent decrease welcome relief.
The decline of Florida mortgage loan costs since June followed growing speculation that a slowing economy would curb inflation and prompt the Federal Reserve to end its rate increases, which began in the summer of 2004 and occurred at 17 consecutive meetings. But Tuesday, the U.S. central bank left its federal funds rate unchanged at 5.25 percent.
To put the recnt decline in mortgage rates in perspective, a borrower of a $250,000 Florida home loan would pay about $70 less per month now on his/her 30-year fixed-rate mortgage compared to June.
Fixed-rate mortgages continued to gain popularity over adjustable-rate loans, according to MBAA data. The ARM share of activity fell to 27.6 percent of all applications last week, the lowest level since March 2004. The average rate on a one-year ARMs declined to 5.96 percent last week from 6.18 percent.
The MBA’s seasonally adjusted purchase mortgage index climbed 3.4 percent to 388.9 last week from 376.2, although that compares to levels near 500 a year ago. The index of refinancing activity in the market climbed 7.1 percent to 1,518.1 from 1,417.2.
