Home loans rates in the U.S. are at their lowest in decades, but this did not convince borrowers that now would be the best time to get a loan or to refinance existing mortgages. According to the Mortgage Bankers Association (MBA), applications for home mortgages declined during the first week of July 2010 by 2.9% compared with the previous week. The decline is considered significant even with the adjustment made by the association for the Independence Day holiday.
Mortgage refinancing applications dipped by 2.9% during the week in focus, with loan applications for purchasing residences also declining by 3.1% . According to the MBA, these figures created the lowest index level since the last month of 1996. Despite the decline in refinancing requests, almost 80% of loan applications were for mortgage refinance.
The lack of interest from borrowers and homeowners is prevalent despite mortgage rates being at their lowest in history. Rates for mortgage loans have been declining since April 2010, right after investors decided to shift their money into the safer ground of Treasury bonds. Market observers have stated that this move was prompted by fear over the far-reaching impact of the European debt crisis.
Investors' decision to go for Treasury bonds caused yields to decline which greatly affected the rates of fixed-rate mortgage home loans. Market experts have explained that long term loan mortgage rates usually track such yields.
Meanwhile, the first week of July also showed the average rate of 30-year fixed rate loans declining by 4.57%. According to mortgage giant Freddie Mac, the figure is the lowest ever recorded for a 30-year fixed mortgage since 1971 when the company started keeping track of mortgage rates.
The MBA survey focused on more than 50% of loan applications in the United States. The association has been conducting such surveys since 1990 and has revealed that the week's figures are some of the lowest ever recorded in the U.S. According to market analysts, the reluctance of borrowers to take advantage of the low mortgage rates can be attributed to lessons learned during the height of the foreclosure crisis.
Despite the low rates of mortgages in the country, borrowers continue to shy away from getting home loans and from applying for refinancing. This trend is expected to continue all throughout the 2010 period.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.
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