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Rates Drop Below 6%, But Refis Hardly Surging.
Long-term mortgage rates dropped below the psychologically important 6% mark in early January, which raises the specter that servicers may have to manage higher portfolio churning at the same time they are busy trying to cope with a rising default management burden.
Or maybe not, according to some economists.
Recent economic news suggests that lower rates are not a fluke. Several economic indicators suggest a slowing economy, and Federal Reserve Board chairman Ben Bernanke has said that the Federal Reserve Board is prepared "to take substantive additional action" to promote economic growth. That translates into more rate cuts are likely.
The average rate on new 30-year, fixed-rate loans fell to 5.87% in the week ending Jan. 11, according to Freddie Mac's weekly survey. That's the lowest level since September of 2005, a period that coincided with the peak of the housing boom. The average rate on 15-year FRMs fell to 5.43%. In both cases, the average points paid was 0.4 at closing.
The Mortgage Bankers Association's weekly survey of loan applications already is reflecting the impact of lower mortgage rates, with the total volume of home loan applications rising to a four-week high during the first week of January, driven by increases in both home purchase and refinance lending.
The MBA's refinancing index jumped 54% during the week ending Jan. 4, and the refinance share of mortgage applications rose to 58%.
But the MBA also says that refinancing will not pick up as dramatically as it has during previous periods of declining interest rates.
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Source: HighBeam Research, Rates Drop Below 6%, But Refis Hardly Surging.