The latest weekly mortgage application surveyreleased today by the Mortgage Bankers Association makes no sense. Mortgage applications fell 4.9 percent overall, with applications to purchase a home essentially flat and applications to refinance down 6.3 percent. The part that doesn't make sense is that refi's have fallen for the second straight week, at the same time that mortgage rates have fallen for the second straight week.
Lower rates usually spur more refi's, not fewer.
The reason we're not seeing a surge is that most people who qualified for refi's, already did when rates went below 5 percent. Now rates flirt around the 4.25 percent area, dipping momentarily, but not long enough for borrowers to pull the trigger and get the biggest benefit. Despite sudden drops in the 10 year Treasury yield, lenders are not rushing to offer super low rates because they don't want a flood of refi's and because they get enough business at 4.25 percent. Right now, without much competition from their peers, lenders don't see it as cost effective to lower rates.
Then there is of course the underwriting issue. A lot of folks simply don't qualify for these low low rates, so the pool of potential applicants is limited.