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Rise in purchase applications precedes rate drops

November 15, 2010 - Possibly anticipating Federal Reserve actions that would lower mortgage rates even further, relocating families drove purchase activity higher last week.

The Fed announced its quantitative easing plan November 3, a maneuver that would purchase $600 billion in Treasury bonds in order to help boost the economy. The Mortgage Bankers Association reported that for the week ending November 5, purchase applications rose 5.5 percent from the previous week, a possible indication that more families are willing to get their moving plans going now that rates are expected to set new record lows.

However, Michael Fratantoni, the MBA's vice president of research and economics, said that it wasn't just the opportunity for lower rates that was pushing buyers.

"The increases in purchase applications we have seen over the past couple of weeks align with the better than expected news from October's employment report and other data indicating some improvement in the economy's growth prospects," he said.

Still, many homebuyers could be encouraged that moving into a new home is becoming more affordable. Freddie Mac reported that average interest rates on 30- and 15-year fixed-rate mortgages both established new record lows this week, while five-year adjustable-rate mortgages also hit a new bottom.
 

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