Mortgage Applications Soar as Rates Continue to Fall

Mortgage rates have continued to decline throughout the year so far, defying forecasts and breaking into lows rarely seen before, but now many experts are left asking the question: how long can it last? Regardless, many homebuyers as well as owners have been seizing the opportunity in front of them as loan applications soar, giving agents and brokers just one more reason to rejoice at what is typically seen as the off season.

rise in priceAccording to the recent study from the Mortgage Bankers Association, applications for home loans surged upward by 49% for the week ending Jan. 9 – the largest jump seen since 2008. The total increase is a result of a 66% gain in refinances and 24% increase in purchase applications.

What’s more, the surge in mortgage applications could continue further into the year. Recently, the average offer on a 30-year fixed loan dropped to 3.66%, which is down from 3.73% the week before and 0.75% lower than the same time one year ago.

“Our business is exploding,” said Jeff Lazerson, president of the Mortgage Grader brokerage in Laguna Niguel. “We can’t write deals fast enough.”

The recent decline in mortgage rates has defied many experts’ forecasts, many of whom predicted 2014 would end with rates at 5% – much higher than the 3.87% actually observed. With recent concerns over foreign economies slowing, many investors have decided to make a safer investment in U.S. Treasury securities and government-backed mortgage bonds, all of which has helped keep rates low.

“Given the weakness in global economies, mortgage rates are likely to stay low for the near future,” said Stuart Gabriel, director of UCLA’s Ziman Center for Real Estate. “That should help spur home sales by making housing more affordable.”

Similar to the predictions made regarding 2014, many experts have also predicted that rates will climb to around 5% by the end of 2015 – a result of improvements made within the U.S. economy and increase in short term interest rates by the Federal Reserve. It should be noted though that these predictions came before the recent drop in rates.

Should buyer’s expect to see these record-low rates throughout the year, or is now the time to pounce? What are your thoughts?