Despite being advantageous for consumers, the amount of applications for fixed rate mortgages declined sharply over the past few weeks. Analysts are blaming the plunge on a variety of different reasons, including the poor housing market, banks tightening their restrictions and overall consumer uncertainty. Even applications for a refinance fixed rate mortgage declined, much to many experts’ surprise. They fully expect the housing crisis to continue over the next two years, but the Fed is doing all it can to encourage growth.
“Credit restrictions are feeding back on to the housing market,” said Brian Bethune, director of financial economics at Global Insight Inc., based in Lexington, Massachusetts. “The housing contraction will remain a drag on the economy.”
“Market conditions remain challenging across many of our markets,” Chief Executive Officer Ara Hovnanian said in a statement.
“There is a long disconnect between the fed funds rate and fixed mortgage rates,” said Keith Gumbinger, vice president of mortgage and consumer loan information publisher HSH.com.
“The 30-year fixed rate mortgage should be at 5.5%, but instead it’s above 6%,” said McBride. “The 30-year jumbo loan [a large mortgage that is not federally guaranteed] is a full two percentage points higher than it should be.”
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