One upside of the uncertain economic situation is a dip in mortgage rates, which this week fell below 4.5 percent for 30-year fixed- rate home loans for the first time this year.
Local brokers say mortgage applications, including refinances, have picked up as rates have dropped more than a quarter-point since last week.
The national Mortgage Bankers Association said Wednesday that mortgage applications were up 7.1 percent last week as rates on Treasury bonds plummeted. Mortgage rates closely follow Treasury rates.
Refinancing activity, which makes up the majority of mortgage applications, was up 7.8 percent over the previous week, while purchase activity increased 5.1 percent.
MBA vice president of research and economics Michael Fratantoni attributed the decline to the debt- ceiling debate in Washington and economic data depicting “much- slower-than-anticipated economic growth.”
“Refinance application volume increased, but even though 30-year mortgage rates are back below 4.5 percent, the refinance index is still almost 30 percent below last year’s level,” he said. “Factors such as negative equity and a weak job market continue to constrain borrowers.”
Boulder mortgage banker Lou Barnes said rates on 30-year fixed home loans with no origination fees or discounts were as low as 4.375 percent, the lowest level since last fall.
A series of negative reports came out late last week and earlier this week, including a downward revision to economic-growth figures Friday, a report Monday indicating U.S. manufacturing barely grew in July and Tuesday’s news that consumers cut spending in June.
The deepening European debt crisis also weighed on rates, Barnes said. Concerns are rising about whether euro-zone governments can support Italy and Spain, if necessary, as trading in those countries’ debt this week pushed up their borrowing costs.
The Dow Jones industrial average rose 30 points Wednesday after ceding more than 800 points during the previous eight trading days.
On Friday, the federal government reports the July jobs and unemployment numbers. A strong report could send mortgage rates rising again, but a poor report could keep rates low for some time to come, Barnes said.
“All eyes will be on the jobs numbers,” said Jerry Kaplan, vice president of capital markets at Cherry Creek Mortgage in Denver.
“There’s more refinancing activity than there’s been for most of the summer,” Kaplan said. “Seventy- five percent of our business is purchase transactions, and there’s good purchase activity. Prices have dropped low enough that people are taking advantage of some good bargains.”
Greg Griffin: 303-954-1241 or ggriffin@denverpost.com
