In a previous post we stated that we expected to see an increase in refinance loans in the coming months. As it turns out, that refinance bump might be here sooner than expected.

The Mortgage Bankers Association (MBA) announced last week that there has been a steady trend of increasing refinance applications. A spike of 9.2 percent from the previous week (June 21-25) is the highest the Refinance Index survey observed since the week of May 10--May 15, 2009, over one year ago.

Additionally, the four week moving average in the Refinance Index moved upwards 8.3 percent. The refinance share of mortgage activity increased to 78.7 percent of total applications from 76.8 percent the previous week, which is the highest refinance share observed from the survey since April 2009.

The increase in refinance applications seems to indicate that borrowers are looking for either lower monthly payments or reduced interest rates. Both can increase disposable income and consumer spending, or give them valuable options such as the ability to pay off other debts from active credit cards.

On the contrary, a falling number of purchase applications imply a decline in home purchases, a negative for the housing market and the economy as a whole.

What we’re still looking for is balance. Purchase loans raised initially in February through April as first time home buyers gobbled up the chance at home ownership. Now as the deadline for purchase loan closings has been extended by Congress, purchases are beginning to slow and refinance loans are beginning to rise.

The conclusion is that the housing market, and the economy as a whole, is still experiencing some turbulence. Many economists predict that we won’t see significant growth until 2011. Until then, continue to watch mortgage rates and consult a mortgage banking specialist. Consultations with us are always free and our primary goal is to get you the best information so you can do what’s best for you and your family.

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