Mortgage Applications Drop; First Time Home Buyer Tax Credit Expiration Nears
Posted on | October 28, 2009 | No Comments
The Mortgage Bankers Association said that purchase applications for home mortgage loans dropped for the third straight week. The drops illustrates a weakness in mortgage applications that we have not seen since May. The drop in applications comes at a time when the first time home buyers tax credit nears expiration. Many first time home buyers are likely to avoid buying a home if they know they cannot close by the deadline of November 30th.
The first time home buyers tax credit greatly helped to stabilize the housing market and sparked great interest for first time buyers. The question that many analysts must answer is “if the tax credit expires will we go right back to where we started?” There has been great debate in Washington about extending the tax credit and at this point it looks as if there is a strong possibility of an extension with some adjustments.
Even though mortgage interest rates were right at 5% last week we saw a drop of 12.3% in the mortgage applications index. Purchase applications drop 5.2% while refinance applications dropped 16.2%. It will be very interesting to see what happens to mortgage applications if the tax credit is not extended; expect to see purchase applications plummet if this is the case.
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Author: Alan Lake
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