Washington, DC (PressExposure) March 24, 2009 -- Freddie Mac recently announced that the rates for a 30-year fixed home loans dropped to 4.98% and many observers expect them to go to as low as 4.5% in the very near future.
The Mortgage Bankers Association's index of applications to purchase a home or to refinance a loan rose by 21% to 876.9 for the week ending March 13, taking it to its highest figure for two months and the group's refinancing gauge jumped by 30% percent and the purchase index gained 1.5%.
The news sounds good, but lower mortgage rates by themselves won't be enough to cause any major demand for home purchases.
The U.S. jobless rate rose to 8.1% in February as employers reduced payrolls by 651,000, and people that lost their jobs or are worried about losing them won't be rushing to take out mortgages, and would- be buyers are also having difficulties obtaining mortgages because lenders have tightened their lending criteria.
The Fed is attempting to lower interest rates by reducing the supply of outstanding mortgage bonds, by boosting their prices and by lowering yields, and U.S. central bankers have announced their intention to buy up to an additional $750 billion of mortgage-backed securities from Fannie Mae, Freddie Mac and Ginnie Mae, in order to support home lending.
The Mortgage Bankers Association says that mortgage delinquencies increased to a seasonally adjusted 7.88% of all loans in the fourth quarter, which is the highest number since record keeping was started in 1972, and the number of loans in foreclosure rose to 3.30% which is also an all-time high.
The Fed's plan to buy additional mortgage bonds is now expected to increase its purchasing commitment to as much as $1.25 trillion.