Purchase applications fade

Fewer relocating homeowners sought mortgages to finance their purchase of a new home for the week ending October 8.

The Mortgage Bankers Association reported that purchase applications declined 8.3 percent from the previous week, even as mortgage rates established new record lows. The average interest rate on a 30-year fixed-rate mortgage fell to 4.21 percent that week, while the rates for a 15-year FRM dropped from 3.73 to 3.62 percent - both new all-time lows, according to the survey. Still, low mortgage rates did little to encourage families to hire a moving company, especially after new FHA regulations took effect.

"Last week saw a big jump in applications for FHA loans to purchase homes," said the MBA's vice president of research and economics, Michael Fratantoni. "We surmised that this was due to potential buyers wanting to beat the stricter FHA standards that went into effect October 4th. This conjecture was confirmed by the fact that this week FHA applications fell back to a level closer to the average seen over the past four months."

On the other hand, refinancing activity surged 21 percent from last week. That development could provide a boost to the economy, mortgage expert Leif Thomsen told Bloomberg, because it could free up as much as $3 billion to $4 billion per month for American consumers to use for spending.
 

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