Growing mortgage applications in the US

Mortgage Bankers Association shows 8.3 per cent surge in mortgage applications in the last week ending 18 January.

According to a report out of Washington from the Mortgage Bankers Association, more mortgage applications were seen in the week ending 18 January than expected. The rise was 8.3 per cent more than the previous time period.

Of that number, there was a mixed bag of purchases. Refinance volume was the catalyst behind the move with a 16.9 per cent rise. This is fuelled by lower interest rates and the need to refinance the likely soon to be adjusting adjustable rate loans. Of these numbers, 66 per cent of all applications were for refinances.

On a sour note, the purchase volume dropped 4.6 per cent during that same week.

According to statistics, the average US housing mortgage interest rate for a 30 year mortgage is at 5.31 per cent, which is down considerably over the last year and nearly a full percentage point down from just six months prior.

The additional Federal Reserve interest rate cut which happened on Tuesday is likely to spur even more home refinancing and purchase growth. The rate dropped 0.75 per cent down to just 3.5 per cent, which is the largest rate drop in recent history. This rate is likely to help bring down the interest rate that banks charge their customers. In doing so, it could spur additional activity throughout the country.