Fed moves spur mortgage refinance applications to soar

Mortgage rates have dropped sharply over the past two weeks and home owners are racing to refinance their home mortgages. According to a report from the mortgage bankers association, refinance applications surged over 20% in volume share over the past week as consumers looked to lock in historically low interest rates.

The rapid drop with interest rates can be directly tied into a recent decision by the Federal Reserve to purchase over 700 billion of mortgage backed loan securities from companies such as Fannie Mae and Freddie Mac. This recent move was directly aimed at attempting to unlock the credit markets and bring the spread between the ten year bond and mortgage rates in line. The ten year bond is hovering below 3% as record numbers of investors have been fleeing into bonds looking for more security for their financial investments.

The moves by the fed are a direct attempt to bring down rates on home loans for home owners exploring refinancing options as well as those who are hoping to purchase a new home. Lowering interest rates on mortgages one full percent, will help new buyers afford up to $10,000 more home value for the same house payment as projected with the higher rate. The lower refinance rates may not last forever, as the stock market continues to be extremely volatile.