Rise in Mortgage Applications Signals Hope for Home EquityBy Richard Barrington
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Perhaps the most innocent victims of the recent mortgage crisis have been homeowners on the verge of applying for a home equity loan, either as a source of cash or as a means of refinancing. After all, these are homeowners who have steadily paid their mortgages and built equity in their homes. Then suddenly, weakening real estate prices threatened to erode the home equity they had counted on. Those homeowners can take heart, though--recently released figures suggest home equity may at least be firming up, if not due for a rise.
New Purchase Mortgages Indicate Improved DemandThe increase in new home purchase mortgages is a sign of new demand coming into the marketplace. Real estate is very much a supply-and-demand market, and so new demand means new support for prices.
To current homeowners, this means a bolstering of home equity values. This adds to net worth and potential sources of capital.
Mortgage Rate Stimulus Significant TooPerhaps even more significant than the upturn in mortgage applications is the underlying cause--the lower level of mortgage rates. Lower mortgage rates are a double-positive for potential home equity borrowers. Indirectly, they stimulate demand for housing and thus support real estate prices. Directly, they mean lower borrowing costs.
For existing homeowners, these two trends add up to more refinancing flexibility, and more home equity muscle.
About the Author
Richard Barrington is a freelance writer and novelist who previously spent over twenty years as an investment industry executive.
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