Fixed Rate, Prime Mortgages Dominate Market

July 29, 2008 No Comments »


Demand for prime and fixed-rate mortgages increased during the second half of 2007, according to a report released today by the Mortgage Bankers Association.

Fixed mortgages accounted for 63.6 percent of all first mortgages in the last six months of 2007, compared to just 53.4 percent during the first half of the year.

And 79 percent of all loan origination dollars were for prime loans, up from 70 percent in the first half of 2007, while 7.5 percent were non-prime (10.4 percent in 1st half) and 7.8 percent were Alt-A (15.8 percent in 1st half).

The MBA attributed the increased popularity of fixed-rate mortgages to a significant decline in long term mortgage rates, a tighter spread between adjustable-rate mortgage and fixed rates, and the slowing of subprime lending, which is often accompanied with an adjustable-rate.

Government-insured FHA loans and VA loans also saw an increase in market share, accounting for 5.7 percent of all origination dollars, up from 3.8 percent six months earlier.

The MBA noted that government loans replaced subprime and other non-traditional types of home loans as most mortgage lenders pulled out of the high-risk space.

Additionally, the survey found that the origination of deferred interest products, such as interest only loans and option arms, slowed as a result of tighter underwriting guidelines.

Sounds like a return to more sensible lending.

(photo: richardsummers)

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