Mortgage applications hit their highest level in more than five years as borrowers took advantage of low interest rates to refinance their home loans.
While low rates are a great opportunity for borrowers with solid credit and equity in their homes, those in danger of foreclosure are sidelined, and defaults are expected to keep rising in the coming months.
Applications surged earlier this month to the highest level since July 2003, when refinancing activity boomed at the peak of the housing market. More than 80 percent of applications came from borrowers looking to refinance at more affordable rates. Mortgage brokers who previously had to cut staff are now overwhelmed with more business than they can handle. ”We need to streamline our operations and maintain tight control of our pipeline to ensure we can provide fast efficient service” one mortgage broker was quoted.
Interest rates have plunged since the Federal Reserve said last month it would buy up to $500 billion in mortgage securities to bolster the suffering housing market. The Fed, starting early next month, will buy securities guaranteed by the government home loan giants Fannie Mae & Freddie Mac.
The average rate for traditional, 30-year fixed-rate mortgages decreased to just above 5 percent this week. That was the lowest point in the weekly survey since rates fell to 4.99 percent in June 2003.
