Smart Borrower Blog

Mortgage Applications Hit An All Time Low

Dec 28th, 2007 @ 4:30 PM by Alden Smith

America’s Mortgage Bankers’ Association is reporting a 7.6% slide in its application index through the week of December 21st.  This is the most it has dropped since the end of last year.  It is a good indicator of the current condition of the mortgage market.

Borrowing costs are considerably lower now than they were in September.  It appears lenders have tightened up their lending criteria and are being a bit more cautious about whom they lend to.  One can pretty much attribute this to the massive bleeding in the market due to the sub prime debacle.  Prospective borrowers with good credit should now be able to make the deal, although they may have to shop around due to the nervousness of many lenders.

The market is certainly troubled, with home purchases and remortgages down in the past two weeks.  Total loan applications at the beginning of December had fallen nearly 20%, indicating the caution in the market.

Many home owners are currently unable to sell existing homes.  They also are not putting these homes on the market due to the fact that with existing home values dropping, they are unable to get their equity out, and this of course leads to not being able to afford to put up the money for a down payment. According to Standard & Poor’s Case-Shiller national index published this week, property prices took the biggest tumble on record during October.  People who are in a stable situation, able to afford their mortgage payments, and looking for a new home, whether upsizing or downsizing, are sitting tight until things look a bit better.  No one can find fault with that attitude.  If the value of the existing homes is currently down, then refinancing also becomes a no win situation.

Have we seen the bottom yet?  It doesn’t appear so.  According to Gregory Miller, chief economist at SunTrust Banks, it will be late in 2008 before signs of this letting up happen.  Mr. Miller says he is being optimistic on this prediction, and it could be well into 2009 before any sign of recovery happens.

At this point, I don’t think anyone can predict what will happen or how this will straighten itself out.  Although we hear of many plans and ideas to help the floundering mortgage market, only time will tell if this happens.

2 Responses to “Mortgage Applications Hit An All Time Low”

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