Mortgage Market Going Lower With Each Passing Day
RateEmpire.com
The continuous decline in the mortgage market is giving more fear to the economy, with the home sales falling further and credit crunch hitting homeowners badly. Even the major players in the banking sector were hit hard due to the meltdown.
According to primary mortgage market survey by Freddie Mac, the mortgage rates are on the continuous decline but slowly. The 30-year fixed rate mortgage averaged 6.20% with 0.5 point in the last week. The previous week it averaged 6.24% with 0.4 point. Whereas, just a year earlier it was 6.18%.
The 15-year FRM was down by five basis points from the previous week to an average of 5.83%. Fees and points increased to 0.5 point from 0.4.
The five-year Treasury indexed hybrid adjustable rate mortgage dropped to 5.88% from 5.96% with points increasing from 0.4 to 0.5. But just a year ago the 5-year ARM averaged 5.99%. One year ARM was down by eight points from the average of 5.50, the last week. Fees and points increased to 0.6 point from 0.5. However, a year earlier the average was 5.49%.
The mortgage disaster has hit the major financial market badly. Profits at the major bank hit four year low in the third quarter. Banks like bank of America and SunTrust posted double-digit decline in earnings during the recent quarter. Federally insured banks and thrifts posted profits of $28.7 billion in the third quarter, that was down 24%, or $9.4 billion, from the same quarter, the year earlier.
In the credit market, the crisis has left the homeowners in an unfavorable situation, which is getting really worst day-by-day. One in three mortgage holders are expected to face serious financial problem as a result of the credit crunch. According to market analysts, the lenders have become very cautious following the crisis in the credit market.
According to other updates, mortgage application volume decreased 4.3% on a seasonally and holiday adjusted basis from the previous week and 25.5% on an unadjusted basis, due to the thanksgiving holiday shortened week. However, application volume was 24.6% higher than the same week, the year earlier.
Refinancing is the major part of the overall mortgage activity. It was down to 45.8% from 50.3%, the last week. Moreover, the market share of the adjustable rate mortgages dropped to 14.6% of the total application, from 15.8% the week before.
However, the home sector report shows further fall in the home sales, including single family, townhomes, condominiums and co-ops. But according to economists, inspite of a record drop in home sales and low interest rates, potential homebuyers were caught in the current credit crunch to stay on the sideline. Moreover, the weak consumer confidence is not boding well for the housing industry.
However, it is expected that the global credit crunch and growing fears of the economic recession is resulting in a return to historically low long-term mortgage rates. And lower rate means lower housing price, which is easily affordable to those who wants to buy or refinance a home. The huge inventory of homes for sale is a problem for home seller, but buyers are finding the combination of the low home price and low rates to be a good one.
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