More Mortgages Because of Low Interest Rates

There are an increasing number of people getting new mortgages because of the current low interest rates in the market. Moreover, this is a result of the desire of homeowners to lessen their payments and shorten the term of their loans.

The Mortgage Bankers Association expects almost $20 billion increase in new mortgages for the current year, with the majority of them refinancings.

According to Mike Fratantoni, the vice president of research of MBA, there has been an appearance of situations that could cause rates to drop and refinancings to increase, particularly because of Europe’s market crisis.

The MBA forecasted that interest rates will be lower this year because of the decreasing debt situation in some places of Europe and slow global economic growth.

Based on a Thursday report from Freddie Mac, the government-owned mortgage buyer, there was a slight increase in interest rates this week, particularly, the average rate for a 30-year loan was 3.71 percent, which is an increase from the 3.67 percent in the previous week.

According to Derrick Wynkoop, the president of Walden Savings Bank, there has been a 60 percent increase in closed loans in the first five months of 2012 compared to the same time one year earlier. Moreover, almost 55 percent are refinancings and 45 percent are new purchases.

Robert Michaud, senior vice president of Mid-Hudson Valley Federal Credit Union, said that they have encountered an extremely high demand for refinancings.

There is also an increase in single-family home sales, but still less than those in the early part of the decade. According to Wynkoop, savings for deposits and closing costs have been eroded because of unemployment and underemployment. Moreover, potential buyers have been hesitating because of strict standards to become eligible for a loan.

Michaud said that there have been more denials compared to the past and the majority of these denials are because of collateral, income qualifications or credit.

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