Mortgage Applications Fall to 8 Year Low

According to research released by the Mortgage Bankers Association yesterday mortgage applications fell 25% last week. The Mortgage Bankers Association’s index reported that new home purchase applications dropped 9.8% last week to the lowest level since the end of 2000. The association’s index also showed that mortgage loan refinancing applications fell 30.3% last week to the lowest level since the week of November 21st. The fall in mortgage applications comes even as the average 30-year mortgage rates went down from 5.28 percent the week before to 5.19 percent.

The fall in mortgage applications is believed to be caused by borrowers holding out for better terms and government help. With Treasury Secretary Timothy Geithner’s proposal in the works that will potentially use between $2 trillion and $2.5 trillion to stimulate the housing market and unfreeze the credit market, it may pay for borrowers to wait. “In addition to waiting for the rate, you have home prices continuing to come down, so why would I pay $200,000 today when I can pay maybe $180,000 in a couple months or even $150,000,” Daniel Penrod, industry analyst for the California Credit Union League in Rancho Cucamonga, California, said on Tuesday. The government is “really pushing against some very strong forces.”

“There’s no urgency to jump in until prices settle,” Penrod said. “Given the current state of unemployment and the projections there is still downward movement coming in the first half of the year for non-foreclosure sales and prices.”

U.S. employers slashed nearly 600,000 jobs in January, the biggest monthly cuts in 34 years, while the unemployment rate set a 16-year peak.

The $15,000 home buyer tax credit that is part of the economic stimulus program adopted by the U.S. Senate would create nearly 500,000 home sales and add 255,000 jobs in the coming year, according to the National Association of Home Builders.

Analysts had also been predicting that at least a third of home owners applying to cut costs by refinancing would be turned down because of more rigid lending standards, job loss or because their home values have fallen below the size of existing mortgages.

To read more about U.S. mortgage applications slump to 8-year low head on over to Reuters.