Interest rates are dropping again. Why?

There are several factors impacting the market these days. Some of contributing factors are:
1. The overall composite index jumped 17.0% frm the previous week, re-finances were up 22.5% while purchases were up 9.5%.
2. The refinance share of mortgage activity increased to 59.8% of total applications from 56.5% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.8% from 5.6% of total applications from the previous week. This was the largest gain since early April, putting the index at the highest level since the first week of January.
3. The 10 yr note at 8:00 -2/32 at 3.49%, mortgages opened a little lower (-2/32 at 8:15). The stock indexes were trading better at 8:30 but not much. At 9:00 the 10 yr -5/32 while mortgages were unchanged. At 9:30 the DJIA opened a little better, the 10 yr -5/32 and mortgage prices -1/32.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 5.02% from 5.15%, with points increasing to 1.23 from 1.09 (including the origination fee) for 80% loan-to-value (LTV) ratio loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 4.45% from 4.57%, with points increasing to 1.13 from 0.85 (including the origination fee) for 80% LTV loans.

What does it all mean?

Low mortgage rates are obviously the tonic to turn the housing markets around; most of the improvement is coming from first time buyers taking advantage of the tax credits that will expire soon unless extended.

If you are sitting on the rate watch fence, this may the time to get off. Individual situations require individual solutions. Contact your lending professional for advice. Don’t have one? Click here.