The mortgage rates in the United States rose last week. Economy shows its first signs of recovery and as the Treasury yields climbed, it affected the mortgage interest rates the same way. However, is the demand for new mortgage applications and refinancing going up?
Several publications, starting from Reuters to TransUnion point that demand for higher mortgage rates is not there. It simply may not be sustained. "Higher rates have dampened demand for home loan refinancing, a reversal from earlier this year when rates below 5 percent caused refinancing activity to surge," writes Reuters today in its story about the relation of interest rates and the housing market.
Experts say that the mortgage rates should be at and below the 5 percent in order to keep significant demand mortgage refinancing and for first time home buyers. However, The house interest rates have been above 5 percent already eleventh straight week.
For the week, ending August 13 the 30-year fixed mortgage rate averaged 5.29 percent nationally. Treasury yields, which are linked to mortgage rates, have risen recently, with mortgage rates responding in kind.
According to Transunion.com "mortgage loan delinquency (the ratio of borrowers 60 or more days past due) increased for the tenth straight quarter, hitting an all-time national average high of 5.81 percent for the second quarter of 2009. Traditionally seen as a precursor to foreclosures, this statistic is up 11.3 percent from the previous quarter's 5.22 percent average. For comparison purposes, fourth quarter 2008 to first quarter 2009 saw an increase of almost 16 percent, indicating a continuing deceleration in delinquencies for the second quarter. Year-over-year, mortgage loan delinquency is up approximately 65 percent (from 3.53 percent)."
The $8,000 dollar credit
We know that this rise in rates is negative for the U.S. home buyers. As the market is driving the rates, perhaps the mortgage lenders bet on the $8,000 dollar credit that the government is giving to the first time home buyers. Surprisingly 7 out of 10 people don’t know about the tax credit available or how to qualify. Due to a provision in the American Recovery and Reinvestment Act of 2009, taxpayers who haven’t owned a primary residence in at least three years are considered "first time home buyers" and are eligible for a tax credit of up to $8,000.
However, are first-time home buyers really impressed with an $8000 check from Uncle Sam? Blue Skye Lending thinks so. In a story titled First Time Home Buyers Jump At credit one of the people interviewed thinks that the program is incredible. "When else has the government offered you $8,000 that you don’t have to pay back," he says.
Some mortgage lenders are optimistic and cheer the rising mortgage rates, seeing it as a sign of recovery. Mike Tullio, one of the owners of Blue Sky Lending, tweeted few minutes ago about his optimis. Mmortgage rates got better too! Seems like things are lining up for a steady recovery, especially with the $8K FTHB ext. talk," he wrote.
The question is, is it the mortgage rates or the confidence that will drive the housing market in this economy.
Written by Armen Hareyan
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