By Mike Colpitts
Refinancing picked-up speed as homeowners applied for lower mortgage rates in greater numbers to obtain lower mortgage payments
even as home purchase financing slowed, according to the Mortgage Bankers Association.
Almost half or 43% of those refinancing home mortgages chose shorter 15 or 20 year loans during the fourth quarter of 2011, a Freddie Mac study showed. Fixed rate mortgages accounted for more than 95% of refinances. The bankers’ refinance share of mortgage applications rose 0.8% from the previous week to its highest level since last August.
Refinancing makes up more than four out of five mortgage applications, composing 81.1% of activity, the highest pace since January.
Homeowners are taking advantage of lower mortgage rates and an Obama administration program which eliminates loan-to-value ratios on Freddie Mac and Fannie Mae held loans. However, new home loan purchase activity slowed 8.4% for the week as consumers come to grips with a slower home market.
The average mortgage rate on a fully executed 30-year fixed rate loan signed at closing rose to 4.08% for the week from 4.05%, the bankers’ survey indicated. The rate on the same 30-year mortgage hit its all-time record low across the U.S. at 3.87%, according to the Freddie Mac survey last week. But most consumers are unable to qualify for the loan without perfect credit, and are forced to take higher mortgage rates.
Loan sizes have been increasing in recent months as the demand for refinancing rises, increasing to an average of $226,000 in January, the MBA said. The average size of mortgages has slowly been creeping up from $225,000 in December and up from $207,000 a year ago.
The District of Columbia had the highest average loan size in the U.S., hitting $375,000. Indiana had the lowest at $143,000. Refinances carried the largest average amounts at $228,000 as homeowners sought lower mortgage payments.