News: Mortgage applications in the U.S. sink to eight-year low

November 13, 2008 by Marcel

This guest post is by ‘mortgagespecialist’,

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.

17 Comments

Florida Loan Find › Home Mortgage Loans in Florida - Choice Finance said

am November 13 2008 @ 9:15 pm

[...] If you are needing a mortgage for a home loan in Florida it’s good idea to find a home grown option. The lender that seems to be popular these days is Choice Finance. They can underwrite and approve your mortgage funding quickly because they don’t have some of sale middle man issues that their competitors have. As a quick comment on recent lending practices your search might be extensive if your FICO is below 700. Mortgage applications have just dropped to an eight year low nationwide. [...]
Handy Saputra said

am November 15 2008 @ 5:52 am

Nice blog. I will keep reading. Please take the time to visit my blog about “Home Loan | Mortgage Resources”
Roger Hamilton said

am November 16 2008 @ 1:12 am

I think it’s expected that mortgage applications would drop after everything that has happened in the past few months..
Student said

am November 18 2008 @ 2:24 pm

Everybody knows that house prices have been falling and keeping people on the sideline. I am surprised despite the current economy that the number of applications are still declining at this point.
CreditZebra said

am November 18 2008 @ 3:40 pm

It will take a while for the real estate market to bounce back. Unfortunately, Europe and the rest of the countries are in worse shape.
Roger Hamilton said

am November 26 2008 @ 8:04 am

Great post! Thanks for the useful information. Hope to see your new updates soon.
Sade Jordan said

am November 30 2008 @ 7:14 pm

This is what happens when a real estate market has to correct itself from a historic bubble. Good news is all moves (trends) in a market are temporary – and with the help of the government and FED, banks will loosen their grip and once again mortgage notes will flow.
Andrew Knight said

am December 2 2008 @ 7:37 pm

Hi Marcel,

I’m emailing you in regards to a followup email I sent you two months ago in response to a partnership, have you had a chance to think about it?

If you have any questions or would more information, please advise me and we can go from there.

Kind Regards,
Andrew Knight
Jason said

am December 2 2008 @ 10:10 pm

I work for Wikinvest.com, an investing wiki with that covers companies, personal finance topics like 401(k) Plans and Auto Insurance, and concepts like oil prices and the credit crunch. I’ve been approaching top bloggers identified by our business development team about the Wikinvest Wire, a traffic-boosting, invitation-only blogwire for investing and personal finance blogs. We launched the Wire in early October and our Wire members have seen a significant jump in traffic and benefited tremendously from links to their blog showing up on other blogs and Wikinvest.

If this interests you please let me know.

Regards,

Jason Young
Jason@wikinvest.com
Deborah said

am December 9 2008 @ 12:05 am

I recently came across your blog and have been reading along. I thought I would leave my first comment. I don’t know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.

Deborah

http://termlifeinsurance2.com
Jason said

am December 9 2008 @ 5:33 pm

I sent you a message last week about the Wikinvest Wire, and wanted to follow up and see if you had any questions.

I should point out the Wikinvest Wire has recently built up a solid base of personal finance blogs like
Financial Dominance – for example Duel Income no Kids. Since we launched the Wire in early October, our 100+ Wire members have seen a significant jump in traffic and benefited from links to their blog showing up on other blogs and Wikinvest. Installing the plugin takes 5 minutes and we send you a monthly report detailing how much traffic the Wire has directed to your site and where links to your blog were featured. If you’re interested becoming a Wire member, please get back in touch with me.

Regards,

Jason Young
Jason@wikinvest.com
Marcel said

am December 9 2008 @ 8:52 pm

@Jason,

Thanks for the offer Jason I’ll give it a try.
Consumer Credit Debt Consolidation said

am December 11 2008 @ 6:34 am

Only a fool would apply for a mortgage now. The world is officially in a Recession. Party is over, for now. Waiting for your next post on this excellent blog. Thanks from Matt.
seorangs said

am December 18 2008 @ 10:57 am

mortgage loan are drops now… people rush
The central bank, aiming to free up lending and jolt the economy back to life, on Tuesday cut the federal funds rate from 1 percent to a target range of zero to 0.25 percent and pledged to keep funneling money into the market for mortgage investments.
Kenny Williams said

am December 22 2008 @ 11:58 pm

Yes the borrowing expenses have gone up and this has pushed the mortgage refinancing to a rescord low. But honestly, this was bound to happen. You know, after every rise there is a fall, and after every fall, there is again a rise. This is how the economy works.

But there are still ways to profit in a recession market. You just need to where to put your money in and pick the right options. You need to be a bit more careful.

Get professional help – financial planners can help you make the right decisions.
sturat@43mortgages.com said

am December 24 2008 @ 2:09 am

Yes, mortgages demand has been decreased worldwide. I came here and found interesting post on mortgages to update my blog You may visit me and comment if you want to build community. thanks
susan@Promotional Codes said

am January 7 2009 @ 2:24 pm

Everything you have said is just as true for the UK domestic property market and with 15 retail groups expected to collapse in January the outlook for the commercial side is even worse over here.