Normally, mortgage interest rates and mortgage applications operate in inverse directions. With increased demand for mortgages, interest rates usually rise.
Now we have an increase in mortgage applications while rates are going down. Why? Because the overall demand for mortgages is so weak, a temporary blip upward does not relieve the downward pressure on mortgage interest rates.
Bloomberg reports: Mortgage applications for house purchases jumped 8.2 percent in the period ended Feb. 24, the most in six weeks, according to a Mortgage Bankers Association index. The Washington-based group’s refinancing gauge fell 2.2 percent. While housing demand is improving, sales have been restrained by tight credit and a jobless rate holding above 8 percent.
“Affordability has increased dramatically as a result of the decline in house prices and historically low interest rates on conventional mortgages,” Federal Reserve Chairman Ben S. Bernanke said yesterday in testimony to the House Financial Services Committee in Washington. “Unfortunately, many potential buyers lacked the down payment and credit history required to qualify for loans. Others are reluctant to buy a house now because of concerns about their income, employment prospects and the future path of house prices.”