Americans are having an easier time gaining access to mortgage credit for refinancing and home purchase loans at the same time that applications for mortgage loans have fallen.
Access to credit is at the highest levels that it has been in just over three years, and standards may continue to loosen even further in 2014. But even with the lowered standards access to credit isn’t near as high as it was in the years immediately prior to the housing crash.
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“I don’t think there’s any question that mortgage underwriting has gotten easier or is looser than it was two or three years ago, but it’s nowhere near where it was in 2005, 2006,” said Guy Cecala, who works as a publisher of the trade publication Inside Mortgage Finance. “We are talking about easing from extremely tight underwriting standards.”
Why Applications Have Fallen
There are a number of reasons why fewer people have been applying for new mortgage loans despite easier access to credit. Foremost among those reasons is simply that the market suffered from rising interest rates throughout the winter. However, as more and more buyers get use to the higher rates, an increase in activity is likely to follow.
It remains to be seen how buyers will react to rising interest rates that may follow throughout the rest of the year. Most industry experts are expecting a slow but steady increase in rates to continue. Home prices are expected to continue to rise in many locations as well, putting an even further strain on potential homeowners.
Fixed interest rates for a 30 year mortgage now sit around 4.56 percent, which is unchanged from the week before. This is about a full percentage point higher than where rates were at the end of 2012. To get some perspective this is still significantly lower than where rates where in 2006-2008.
Refinancing and Buying: Now Vs Later
As more buyers are having an easier time gaining access to credit, it is worth considering when would be a good time to get a home purchase loan or to refinance. Supposing that you wait you might just find it harder to get the loan on the house that you really want. With prices and interest rates going up, your new home loan will essentially be able to get you less and less the more time that goes by.
So, while getting a loan may become easier, this doesn’t mean that getting the house that you want will necessarily become easier as well. It can sometimes be tempting to look back at where rates where one year and a half ago and hope that they reach those levels once more. But in all likelihood that isn’t’ going to happen. Numerous market forces are pushing rates up including the Fed’s decision to scale back its bond buying program. If you’re at all thinking about refinancing or buying a home in the near future, then the sooner you begin the process the more money that you’ll likely be able to save.
