Mortgage, Refinancing Applications Rise After FHA Lowers Insurance Premiums

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The Federal Savings Bank shares news from the latest credit availability report from the Mortgage Bankers Association.

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The increase in mortgage applications bodes well for the rest of the year, as analysts predict 2015 will see greater home sales than the previous year.

The Federal Savings Bank, a Midwest based lender, is pleased to know that consumers have responded positively to changes in mortgage lending and mortgage rates that could increase housing affordability, as mortgage applications went up in the last week of January. A mortgage applications survey found that applications rose 1.3 percent in the week ending on Jan. 30 from the previous week, according to the Mortgage Bankers Association on February 7th. The increase in mortgage applications bodes well for the rest of the year, as analysts predict 2015 will see greater home sales than the previous year. Thus, The Federal Savings Bank reminds prospective applicants that more home sales means a more competitive market, hence it’s better to pre-approved for a home loan and start shopping for a property now.

Mortgage credit availability improves
One of the causes of the rise in mortgage application was the increase in mortgage credit. The MBA said the Mortgage Credit Availability Index - a measure of lending standards - gained 1.8 percent in January, indicating a loosening of credit. With more access to credit, homeowners could borrow the money they need to purchase homes. The Mortgage Credit Availability Index has been on an upward trend since November 2014 when the index was 114.6 for the month. In the latest reading, the index reached 117.8 in January.

"Several new initiatives aimed at making mortgage credit more available and affordable to consumers were recently announced and resulted in a net loosening of credit over the month," said MBA Chief Economist Mike Fratantoni.

FHA refinancing increases after administration lowers insurance premiums
More credit availability means more consumers aimed to apply for or refinance their mortgages, especially for loans from the U.S. Federal Housing Administration. Refinancing for FHA loans led refinancing volumes after the administration made the decision to cut mortgage insurance premiums, increasing housing affordability for thousands of borrowers, according to MBA.

"Following several weeks of already elevated refinance activity due to falling interest rates, FHA refinance applications increased 76.5 percent in response to a reduction in annual mortgage insurance premiums which took effect Jan. 26," Lynn Fisher, vice president of research and economics at MBA, said in a statement.

Fisher said conventional refinance volumes grew 0.5 percent in the week ended Jan. 30.

Consumers to save money on mortgages with changes
The MBA cited the FHA's mortgage lending changes as a major factor in the increase in FHA refinance applications.The White House said on January 7th that the reduction in mortgage insurance premiums could lower first-time home buyers' and existing homeowners' annual mortgage payments by hundreds of dollars. The Obama administration said the move to lower insurance premiums could help millions of families save billions of dollars in mortgage payments, which could in turn boost the housing market's recovery.

The Federal Savings Bank reminds readers that through refinancing to a lower interest rate or mortgage premium, consumers could stand to save thousands of dollars, which they could put toward other financial goals such as paying off other loans or saving for their next new homes. The increase in mortgage affordability could also help increase 2015 housing sales that could be on track to beat 2014.

First-time home buyers hoping to benefit from lower borrowing costs should contact the Federal Savings Bank, a veteran owned bank, to learn more about applying for a mortgages.

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Giorgio Urbano Ferrero
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