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| Refinancing
expected to continue slowing |
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The recent trend of rising
interest rates has caused the amount of mortgage
refinancing to gradually slow down. Since many industry
experts expect interest rates to keep rising, mortgage
refinancing shows no signs of bouncing back in the near
future. The March 13, 2006 article, “Mortgage refinancing
slows down as interest
rates rise,” released by NewsTarget.com,
offers a summary of the market conditions that are related
to mortgage
refinancing and interest rates.
“Mortgage applications fell for a fourth straight
week as refinancing
waned, an industry report showed. The Washington-based
Mortgage Bankers Association said its weekly gauge of
mortgage applications declined 0.7 percent to 704.8 in
the week ended March 4 from 710.1 in the prior week.”
The amount of mortgage applications had not dropped for
four consecutive weeks since December 2004. The index
that reports on refinancing applications declined 4.6
percent to 2176.8, which was the lowest since the week
of Jan. 2, 2006 and also a sign homeowners will rely less
on home equity as a source of cash for additional spending.
The decrease in refinancing is affecting the economy and
job market.
"Volume is down and as a mortgage lender you have
to adjust to the times by tapering back on staff,’
said Bob Moulton, president of Manhasset, N.Y.-based Americana
Mortgage Group Inc. ‘I've cut my staff back from
20 people to 16 already this year.’”
Meanwhile, the mortgage bankers' index of purchased applications
rose 2.7 percent from 440 to 451.7, the highest rating
since Dec. 24, 2005. The index reached a record high in
January 2005 with a rating of 501.6.
“The share of refinancing as a percent of all mortgage
applications dropped to 42.6 percent, the lowest since
the week ended Sept. 3 [2005]. The refinancing gauge has
declined 78 percent since reaching a record in May 2003.”
“In May 2003, before central bankers began raising
rates, the percentage was about 34 percent.”
Many expert economists expect rates for 30-year fixed
mortgages to continue to rise. This will slow the number
of house sales, but more importantly, for Moulton and
other mortgage lenders, these high rates will continue
to support the decline of mortgage refinancing.
“Anthony Chan, senior economist at JPMorgan Fleming
Asset Management in Columbus, Ohio, expects 30-year fixed
mortgage rates to reach as high as 6.7 percent this year.” |
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