Mortgage industry meltdown

Further problems have become evident in the troubled area that is the mortgage industry, with he number of mortgage applications across the US falling to a six year low last week, according to figures issued by the Mortgage Bankers Association. The news sends additional shock waves through a market sector already riddled with debt and uncertainty, and a public unsure and unable to afford to consider a new home purchase.

The ongoing credit crisis and, in particular, the problems affecting the mortgage lending and general financial markets, have had an adverse effect on the number of people applying for home loans in recent months, and also an effect on the number of properties being built across the country as a whole.

Construction at 17 year low

Industry figures show that the construction of new homes, houses and apartments has fallen to the lowest levels since seventeen years ago this July, and coupled with this fewer people than ever before are refinancing current mortgages, adding to the woes of an already beleaguered commercial sector.

The application index used by the mortgage and construction industries fell during last week to 419.3, a drop of one and a half percent over the previous weeks figures, while the actual volume of applications is down by a total of 61 percent on similar figures from six months ago un February of this year.

The MBA index, a value of 100 on which is a ranking of the application volume at March 1990, the first week in which application volumes were tracked by the MBA, peaked at 1856.7 in week ending May 30th, 2003. This represented the height of the housing boom, and from that the current dire situation in the market sector can easily be seen.

Lower rates have no effect

The index covers about half of all residential retail mortgage applications and originations in a week, and is a good indicator of business in that market amongst banks, commercial or otherwise.

That the application levels dropped despite a concurrent fall in interest rates will set alarm bells ringing; the average rate for a 30 year fixed rate mortgage, the traditional market favourite, fell to 6,47 percent last week, a drop of 0.10 percent over the week before.

Refinance mortgages, generally represented by the 15 year fixed rate option, also saw rates fall from 6.17 percent to 5.99 percent over the week concerned, while the one year adjustable mortgage rate fell 0.8 percent to 7.07 percent.