Applications for refinancing reaches. The highest in 15 months

Refinancing applications hit record and will continue until the housing market revives.

The mortgage market has been hit badly by the recession and there are some notable ups and downs in the market. During the 2nd week of the month of August, 2010, mortgage refinancing applications reached the highest for the last 15 months. This happened because of the mortgage rates, which are at the lowest levels ever seen by the country.

The index of refinancing increased to 17.1% during the second week of August, which ended on 13th. This is highest ever since the month of May 2009 when the index was at the highest during the week, ending 15th May. This increased rush for refinancing the mortgages came from the low levels of the interest rates, which are basically at historic low levels. The mortgage rates have definitely gone down and this can be visible from the following readings:

• 30 years mortgage average rates in 2010: 4.5%


• 30 years mortgage average rates in 2009: 5.2%


• 30 years mortgage average rates in 2008: 6.5%

The rush for this refinancing is evident from the simple illustration given below, using a numerical example:

“Suppose a person purchased a home for $200,000 using mortgage loan in 2008 at a rate of 6.5%, the monthly installments stands at $1,264 every month. If the person refinances it now, at the current rate of 4.5%, the monthly installments decline to $1,013. This means the person will actually be saving $251.00 per month, which will add up to $84, 336 saving at the end of the mortgage! This is definitely a huge savings for the consumers and this explains why they are all going for refinancing.”

This craze for refinancing will continue for some time, because it seems that the housing market will not recover soon, which will force the mortgage rates to be at lower levels. Tracing further back, the housing market will not recover soon, because of the fact that the number of foreclosures are increasing and the banks and lenders are offering heavy discounts on the preoccupied homes, which they repossessed because of foreclosures, so they can empty their inventories soon. As a result, the prospective homebuyers are making profits and they are looking for repossessed properties instead of building new homes.

 For the latest news and the most updated listings of foreclosures for sale, visit ForeclosureDataBank.com.

 

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