By Mark Huffman
ConsumerAffairs.com
February 27, 2008
With many adjustable rate mortgage holders facing higher rates in the coming year, economists and lawmakers concerned about soaring foreclosures are hoping many of these consumers can refinance to lower, fixed rate loans.
The latest news from the Mortgage Bankers Association is not exactly encouraging.
The group's Refinance Index, a measure of the number of new mortgages taken out to replace old ones, fell 30.4 percent in the week ending February 22. Overall, mortgage applications were down 19.2 percent.
A bright spot in the survey showed an 8.4 percent increase in the Government Purchase Index, a measure of government-backed mortgages. Economists have encouraged ARM holders to refinance with FHA and other government backed loans since rates are often more attractive than conventional loans.
But at the same time, consumers continue to take out ARMs. The adjustable-rate mortgage (ARM) share of activity increased to 15.0 from 12.8 percent of total applications from the previous week.
Meanwhile, mortgage interest rates are going up. The average contract interest rate for 30-year fixed-rate mortgages increased to 6.27 percent from 6.09 percent, with points increasing to 1.15 from 1.10 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.
The average contract interest rate for 15-year fixed-rate mortgages increased to 5.77 percent from 5.55 percent, with points decreasing to 1.01 from 1.08 (including the origination fee) for 80 percent LTV loans.
The average contract interest rate for one-year ARMs increased to 5.84 percent from 5.72 percent, with points decreasing to 0.86 from 0.91 (including the origination fee) for 80 percent LTV loans.
