Low rates are helping more people avoid mortgage delinquency.

Affordable rates trigger uptick in mortgage requests

By: James Abbey, November 18, 2015

With interest rates at record lows, more Americans are taking advantage of the affordable environment by getting a mortgage estimate.

Mortgage application activity nationwide for the week ending Nov. 13 rose appreciably, according to newly released data from the Mortgage Bankers Association. Volume increased by over 6 percent from the previous seven-day period on seasonally adjusted basis.

While some of these applications were taken out in order to buy a home, most were done in order to refinance to a lower rate. Nearly 60 percent of mortgage requests were for refinancing purposes, MBA reported, with the average loan size for purchase applications totaling $301,200.

Mortgage delinquencies down to eight-year low
Low rates, made possible by borrowers with strong credit, has enabled more people to pay off their loans, evidenced by the limited number of delinquencies occurring in recent months. During the third quarter, the delinquency rate on mortgage loans for one-to-four unit properties fell to an eight-year low, according to MBA’s recently published National Delinquency Survey. At 4.9 percent, it’s the lowest level since 2007’s first quarter.

Furthermore, serious delinquencies have dropped substantially. In the second to last quarter of the year, loans in a severe state of delinquency dropped to approximately 3.5 percent of all outstanding loans, MBA reported. “Serious” mortgage delinquencies are defined as loans that are three months or more beyond their payment due date.

Marina Walsh, vice president of industry analysis for MBA, pointed out that the country as a whole has benefited from the low-interest rate environment.

“The serious delinquency rate declined for nearly every state in the nation,” Walsh explained. “The factors influencing this outcome include a nationwide housing market recovery, resolution of long-standing troubled loans that eventually proceeded through the foreclosure process, and an improving employment outlook that provided distressed borrowers viable alternatives to foreclosure.”

The trend has also been observed among loans provided by the Federal Housing Administration, Walsh added. The overall delinquency rate for FHA loans fell to just under 8 percent between July and September, down from 9 percent measured against the second quarter. She further stated that the foreclosure supply has fallen, dropping slightly to 2.6 percent of all mortgaged properties.

Mortgage rates south of 4 percent

“July was the last time average mortgage rates were above 4 percent.”

For almost the entire year, mortgage rates have been below 4 percent. That’s substantially lower than what’s been typical in previous years. This has helped more people become homeowners without having to pay much more than the principal amount. During the week ending Nov. 12, for instance, 30-year fixed rate mortgages averaged 3.9 percent, according to Freddie Mac’s Primary Mortgage Market Survey. During the same week last year, 30-year FRMs averaged slightly more than 4 percent.

The Federal Reserve has made several indications over the past year that short-term interest rates may be bumped up, due in part to the economy making improvements. Thus far, however, the central bank has decided to keep things where they are. Some economists predict that a hike may come before the end of the year. This may cause mortgage rates to increase, although some financial experts believe the impact will be marginal at best.