Low rates cause refinance applications to soar

October 3rd, 2012

New mortgage and refinance applications both experienced an increase from the previous week due to falling rates.

Mortgage refinance applications climbed to their highest level since 2009 last week as average mortgage rates drop to new lows.

According to the Mortgage Bankers Association's Weekly Mortgage Applications Survey, the refinance index for the week ending on September 28 swelled by 20 percent from the previous week. Those submitting applications for new mortgages also experienced an uptick, as the seasonally adjusted purchase volume increased 4 percent during this same period.

"Financial markets continue to adjust to QE3, as the ongoing presence of the Federal Reserve as a significant buyer of mortgage-backed securities applies downward pressure on rates," said Mike Fratantoni, MBA vice president of research and economics.

The Fed's announcement that it would spend $40 billion per month in bond purchases for an undetermined period of time has been met with some hesitation among many industry professionals. However, the Fed hopes that the move will allow it to keep mortgage rates low and spark home buying. Although many would-be buyers may consider meeting with a mortgage consultant to discuss their options, it's important that they consider a number of factors rather than solely focusing on mortgage rates.