Lower Interest Rates Spur Increase in Mortgage Applications

According to the Mortgage Banker Association (MBA), a national entity associated with the real estate finance industry, mortgage applications filed within the United States increased by two percent over the previous week. The modest increase may be attributed to lower interest rates, as the last few weeks have seen them slip. The recent increase in mortgage applications is an encouraging sign that the housing sector is getting back on track, but expectations should remain tempered.

The Market Composite Index, a tool used by the association to measure mortgage loan application volume, increased 1.8 percent on a seasonally adjusted basis from the previous week. The Market Composite Index accounts for approximately three-quarters of the residential-mortgage applications filed within the United States. It currently provides us with a reliable indicator of trending housing transactions. By comparison, numbers released by the MBA’s Refinance Index increased three percent from the previous week and are at their highest level since the week ending January 18, 2013.

Numbers provided by the MBA suggest that a recent slip in interest rates may be directly correlated to the increasing amount of homeowners looking to refinance their mortgage. However, expectations should remain tempered, as stricter credit restrictions are still preventing a good majority of homeowners from actually filing their loan applications.

“Low interest rates have attracted new buyers and persuaded many home owners to refinance their mortgages,” Dow Jones reports. “However, tightened credit restrictions still bar many borrowers from filing loan applications.”

Tighter credit restrictions, in association with lower interest rates, have served to stagnate the refinance industry in recent months. The amount of applications filed to refinance an existing mortgage remained unchanged from the previous week at a rate of 75 percent. Adjustable-rate mortgages (ARMs) were also unchanged from a week earlier, at a rate of four percent.

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