subject: Mortgage Applications - Up Despite Strict Guidelines [print this page] With mortgage rates at their lowest levels in decades, the housing market has seen a leap in mortgage applications since individuals look to benefit from the lower prices. This news comes about in the face of lingering unemployment and stricter guidelines for home loans.
While at first glance this might appear to be really good news for struggling market, it isnt quite what it fist appears to be because despite mortgage applications increasing, the number of mortgage applications for buyers seeking to purchase a home is very low even now. .
The increase has in fact come about because house owners are applying for mortgages to refinance their homes to benefit from the low rates, in fact some 80% of mortgage applications account for refinancing.
Mortgage applications for new purchases remain low for a number of reasons. Firstly, since the subprime loan crisis, lenders have come under much stricter guidelines when it involves the approval of loans. This means that lesser individuals currently qualify for a loan than before. In addition, high unemployment means that fewer individuals are in an economical position to go ahead with any large purchases and until more jobs could be generated these figures might stay low. Another contributing issue is the effect that the first time home buyer tax credit had on the market because the tax credit encouraged buyers to bring forward their decision to purchase a home from later in the year. This apparently means that the people who might have been buying a home now have already done so. Decreasing home value is also one more contributing factor to the low number of mortgage applications for new home purchases, as prospective buyers delay their decision to buy until the housing market improves.
It isn't all bad news however. The figures can, actually, be looked on rather positively. Even though few individuals are seeking to enter into the housing market, those who are refinancing have the potential to kick start several areas of the commodity. After refinancing their homes, the people who have done so will find themselves with a sum of money which can not only be used to pay existing debts, but they will also have money to spend.
This spending would increase the flow of capital within business and commerce. An increase in business and productivity would result in more jobs being created as employers need more staff to keep up with the extra demand. This decrease in unemployment can have a snowball effect as more individuals will now have cash to spend, resulting in further increases in the amount of money that is available. If the economy improves in this manner then it'd almost definitely result in improved home sales and the housing market will witness a recovery.
If this additional disposable cash in the hands of those who are refinancing their houses reaches the open market as is anticipated, then a poor housing market could inadvertently be the catalyst for a full financial recovery.
