Data shows mortgage refinance activity at its highest level since 2009

[:en]Low interest rates continue to spur consumer demand for new loans, particularly mortgages, but banks have seen more significant activity from homeowners looking to refinance their current home loans. As banks in the home lending market continue to evaluate candidates for new and refinanced loan, the presence of a sophisticated credit application processing framework becomes all the more valuable to origination teams.

The Mortgage Bankers Association released its most recent weekly applications survey on October 3, describing the volume of mortgage activity nationwide. The agency’s Refinance Index increased by 20 percent to its highest recorded reading since 2009, demonstrating that a high number of American homeowners are seizing on the opportunity of low interest rates to readjust their mortgages.

“Refinance application volume jumped to the highest level in more than three years last week as each of the five mortgage rates in MBA’s survey dropped to new record lows in the survey,” said Mike Fratantoni, MBA’s vice president of research and economics. “Financial markets continue to adjust to QE3, as the ongoing presence of the Federal Reserve as a significant buyer of mortgage-backed securities applies downward pressure on rates.”

Fratantoni was referencing the Federal Reserve’s latest round of Quantitative Easing – the financial strategy meant to lower interest rates by increasing federal asset purchasing in an effort to boost the economy. Record-low interest rates have fueled attractive homebuying conditions – Freddie Mac’s most recent interest rate report showed that average rates for 15- and 30-year fixed-rate loans set new marks for affordability for the second consecutive week on October 4.

Such attractive conditions may push more buyers into the housing market, but banks need to take caution when evaluating these prospects. That is part of the reason a firm credit application framework backed by automated decisioning capabilities is encouraged to buoy any lender’s loan origination process.

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