Plummeting Mortgage Rates Trigger Jump in Mortgage Loan Activity and FHA Loans

Rapidly falling mortgage rates are bringing consumers seeking a mortgage out in droves, according to the report released today by the Mortgage Bankers Association. The association’s Weekly Mortgage Applications Survey, which measures week-over-week volume of people applying for a mortgage to either purchase a home or refinance an existing mortgage, showed loan application activity increased 9.5%.

Applications to refinance an existing mortgage swelled 15.4% from the previous week while purchase applications received an impressive boost as well at 6.4%.

Chief Economist Bob Walters of the nation's largest online lender, Quicken Loans, says the government’s discussion of and ultimate decision to back mortgage giants Fannie Mae and Freddie Mac are the catalyst behind the lower interest rates.

“Mortgage rates began falling last week in anticipation of the government’s Fannie Mae/Freddie Mac takeover and rates have continued to plummet. This interest rate drop led to a surge in mortgage applications as consumers sought to either purchase a home or refinance their existing mortgage,” says Walters.

“Credit guidelines have remained extremely tight however, and the government’s recent action may lead to more stringent credit and equity requirements,” Walters warned, adding that “ FHA loans remain a viable and increasingly popular alternative for those who have been unable to secure financing for a traditional mortgage, as FHA programs carry more flexible guidelines.”