Mortgage Demand Tanks as Markets Await Bailout

Oct 1st, 2008 @ 9:05 PM by Amber Nelson

The volume of home loan applications dropped significantly in the past week, even as mortgage interest rates remained relatively low, according to figures released Wednesday from the Mortgage Bankers Association (MBA).

The MBA’s market composite index, an indicator of U.S. loan application volume, fell a seasonally adjusted 23.0 percent to 455.4 during the week ended Sept. 26, from 591.4 the previous week. The current reading is also down 28.4 percent on a year-over-year basis.

Home purchase loan requests fell by 10.9 percent, but refinance mortgage applications sank by 34.7 percent, an indication of the slowing economy and a painful credit crunch.

Interest rates, however, were not at the root of decreased home loan demand, as they experienced little change during the same period, according to the MBA. Rates on 30-year fixed rate mortgages slipped down to 6.07 percent, excluding points, from 6.08 percent the week before and 15-year fixed rate loans fell to 5.82 percent from 5.84 percent.

Meanwhile, a much anticipated Wall Street bailout bill failed in the House of Representatives Monday and the Senate was scheduled to vote on its own version Wednesday night, leaving investors in suspense as to the fate of many troubled banking and insurance firms facing bankruptcy.

“We need to put something back together that works,” said Treasury Secretary Henry Paulson, speaking of the failed $700 billion bailout scheme.

“We need to work as quickly as possible,” he added. “We have significant tools in our tool kit, but they’re not sufficient. And so we’re going to continue to work with what we have until we get from Congress what we need.”

Opponents, though, counter that “rescuing” major financial companies from their problems with bad paper will only encourage more risky behavior and make taxpayers responsible for corporate blunders.

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.

Posted in Mortgage Rates, Mortgage Refinancing, Mortgages
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