Record low mortgage rates -- and low interest, too
After plummeting in the wake of the homebuyer tax credit expiration, the number of applicants for loans has stayed essentially unchanged, according to the Mortgage Bankers Association's weekly surveys.
Seventy-eight percent of those who are applying want to refinance an existing mortgage, not take a new one out for a home purchase. Even so, applications for refinancing barely budged upward in the trade group's most recent survey, released last week.
When home prices fall, fewer people have the equity to refinance. So that's a key reason lenders aren't getting a borrowing boom from these mortgage rates that are half as high as they were in the mid-1970s and mid-1990s -- and one-forth as high as the 17.8 percent rates people were getting in November 1981. (The average last year was 5 percent, and the average in 2008 was 6 percent.)
Freddie Mac's second-quarter report on refinance activity showed some interesting trends among those who are replacing the mortgages on their homes.
Twenty-two percent, meanwhile, brought money to the table in order to get smaller mortgages -- "cash-in" refinancing. (Some probably did it because they wouldn't be able to refinance otherwise, but others might have wanted to pay down their total to reduce their payments.)
Some perspective: Last quarter's 22 percent cash-in share ties for third-highest since Freddie Mac's survey began in 1985.
Half or more of mortgages refinanced between the summer of 2004 and the end of 2008 were cash-out, as it happens. The peak: Spring and summer of 2006, when nearly nine out of every 10 refinancing borrowers did a cash-out deal. These were the frenzied "home as ATM" days.