This guest post is by ‘mortgagespecialist’,

a member of www.mortgagefit.com,

the world’s largest mortgage community.

In the last week of October, 2008, the demand for mortgage application dropped to an eight-year low. According to a trade group, this has been propelled by an approximately 30% decline in demand for mortgage refinancing because the borrowing expenses have gone up.

The seasonally adjusted mortgage application index of The Mortgage Banker’s Association that comprises both home buying and home refinance loans, skidded 20.3% to 379.9 for the week ending 31st October, 2008. This has been labeled as the most pathetic showing since the month of December 2000.

From early September 2008, a drastic swing has been noticed in the application requests for home purchase and mortgage refinancing while global financial markets were facing turmoil.

A number of government interventions targeted at cutting down mortgage expenses still have not been able to control the situation.

Average 30-year fixed mortgage rates went up by 0.21% to 6.47% in the last week of October 2008 and this corresponded to the level of the week ending 10th October, 2008.

As per that trade group, the interest rate for fixed rate mortgage loans is inching closer to the highest rate of 6.59% of this year that was attained in the summer. Moreover, this is much higher than the 2008 low of 5.49% in the month of January, 2008.

According to the analysts’ opinion, there is no basis to anticipate that there would be a turnaround in the housing industry when 30-year fixed mortgage rates are on the upper limits for a period of six years, unemployment is at a 5-year high and still soaring, as well as an additional supply of houses that have not been sold is forcing prices to go down further.

Growing concerns about probable job cuts have lowered the confidence of the consumers and this has also stirred up a panic about an intensifying recession and led to reducing demand for home buys.

In October 2008, planned job cuts or retrenchments at U.S. based firms soared to an approximately 5-year high and this was an increase of 19% since September 2008. As per the report of Challenger, Gray & Christmas, an outplacement firm, this resulted from the problems stemming from banking and housing industries that impacted the wider economy.

Home prices in the U.S. have gone down higher than 20% off the ceiling that was fixed in the summer of 2006 on the basis of the Standard & Poor’s/Case-Shiller index. The prices are usually expected to lose another 10%.

The Mortgage Banker’s Association stated that its seasonally adjusted purchase index slumped 13.9% to 260.9 in the last week of October 2008, the minimum since the month of December 2000. At the same time, in the last week of October 2008, its refinancing applications index dipped 27.8% to 1,075.4.

In the summer of 2008, the number of mortgage refinancing applications had decreased because mortgage rates escalated during this period, resulting in the index to drop to a significant low till late August, 2008.