Mortgage Demand Dropping - Find Out Why

Fixed-rate mortgages continue to decline rather than increase, which was expected of the second half of 2014. Last week, they reached the lowest average of the year, as reported by Freddie Mac. For the week ending August 21, the average 30-year fixed-rate mortgage was 4.10 percent (down from 4.58 this time last year and 4.12 percent last week), while the average 15-year fixed-rate mortgage was 3.26 percent (down from 3.60 percent this time last year and 3.24 percent last week). Freddie Mac predicts new and refinance mortgage origination volume this year to be the lowest since 2000, at approximately $1.15 trillion.

 So why has mortgage origination declined? Freddie Mac analysts identify three reasons:

1. The refinancing boom is over. The number of home refinances has fallen 60% from 2013 to 2014 and is expected to decrease another 50 percent from 2014 to 2015. Mortgage rates are expected to rise soon, discouraging borrowers from refinancing.
2. Home sales are low. Compared to the first half of 2013, home sales have fallen roughly 5 percent in the first six months of this year. Reasons include slower economic growth, a phase of higher mortgage rates, a harsh winter, minimum new home construction, and limited inventory.
3. More buyers are using cash. Although the number of buyers paying in cash is expected to decrease alongside the number of distressed homes on the market, all-cash home sales rose from 31 to 33 percent in the first six months of 2014.

Whatever the reason, now is the time to take advantage of lower borrowing costs before they inevitably rise!