Recent additional declines in fixed mortgage rates have resulted in a veritable flood of new mortgage applications with the majority designated to refinance existing home loans. One national index shows refi activity since Thanksgiving has risen above the level last seen back in July 2005, and refinancing as a percentage of total loan application volume rapidly has been approaching 60 percent of the pie from what had been a figure closer to 40 percent as recently as early September. Typically, when refinance volume swells, it indicates consumers are on to a good thing. Similar spikes in activity have occurred during each major yield bottom in the mortgage rate cycle such as the one in June 2003. With the government’s widely publicized plan to assist subprime adjustable rate mortgage borrowers unlikely to help more than a tiny fraction of such home owners, it’s becoming clear the responsibility for exiting ARMs will reside with each household. Given the sheer volume of mortgage debt, it was never realistic to expect significant government assistance.
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