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WSJ Reports Mortgage Applications Soaring
Thursday, January 22, 2015 6:35 AM

The Wall Street Journal (Jan 14, 2015) reports that mortgage applications soared in the first full week of the year, as consumers raced to lock in mortgage rates that have hit their lowest level in almost 20 months.

Applications rose 49 percent for the week ended Jan. 9 over the week earlier, according to the Mortgage Bankers Association. It was the largest weekly increase since November 2008 and the most applications since August 2013, after adjusting for seasonal factors. The increase was largely driven by a 66 percent increase in applications to refinance, which were at their highest level since September 2013.

Despite the seasonal adjustment, mortgage application estimates can be volatile around holiday weeks and, therefore, less reliable as an indicator of an underlying trend. Still, on a year-over-year basis, total mortgage applications were up 30 percent for the week ended Jan. 9. Purchase mortgages were up 1.6 percent, while refinance applications jumped 47 percent.

With mortgage rates testing the lows set in May 2013, lenders and mortgage brokers say many would-be borrowers are diving in. During the week ended Jan. 8, the average rate for a 30-year fixed-rate mortgage was 3.73 percent, according to Freddie Mac.

Chase said originations, while down 1 percent from a year ago, were up 8 percent from the third quarter, despite the end of the year typically being a slow period. Last year, the bank reduced its mortgage banking head count by more than 7,500 employees.

Rising home prices also have shunted some would-be home buyers to the sidelines, leading to slowing home sales in many previously hot markets. Those factors have led some banks to lay off personnel. (That was not the case at Chase or Wells Fargo as they sought to dilute their loan portfolios of consumer mortgage loans.)

One big limitation on the potential refinancing pool is how few mortgage holders still have high interest rates. According to the Mortgage Bankers Association, some two-thirds of borrowers with 30-year government-backed loans already have a rate of 4.5 percent or below.

Rising home prices could create an opportunity for homeowners who were underwater a year and a half ago, economists said.