Driven by higher demand for both home purchase and refinance loans and as interest rates remained close to record lows, mortgage applications around the nation rose last week.
The seasonally adjusted index of mortgage applications prepared by the Mortgage Bankers Association reported that there was an increase of 5.8 percent for the week ending November 5th. It was only the third time in eight weeks that activity rose that included purchase and refinance loans.
Michael Fratantoni, the MBA's vice president of research and economics, said in a statement, "The increases in purchase applications we have seen over the past couple of weeks align with the better-than-expected news from October's employment report and other data indicating some improvement in the economy's growth prospects. Refinance applications increased as rates continued to hover near record lows."
Chief economist at LendingTree.com Cameron Findlay said that loan demands have been constrained, despite the fact that many homeowners with mortgages that originated in 2009 or before have an incentive to refinance.
He further stated that, "Lending standards are extremely tight, which is preventing many homeowners from taking advantage of low interest rates. Consumers are also in a de-leveraging mode and they would rather pay down their debt than buy a new home, keeping demand for home purchase loans muted."
Since the expiration of the popular home buyer tax credits earlier this year the housing market has been struggling.
One of the biggest burdens for homeowners who want to refinance are those who are considered possessing "underwater" mortgages where the amount owed on the mortgage exceeds the home's value. The problem is that this negative equity makes many homeowners unqualified for refinancing and prevents some from even selling.