The credit was established through the American Recovery and Reinvestment Act of 2009 and allows first-time homebuyers to receive up to $8,000 in credit on a property valued no higher than $800,000. Repeat purchasers may receive up to $6,500. Those hoping to take advantage of the program will have until April 30 to sign a deal and June 30 to close it. The program was originally scheduled to expire in November.
A recent release from the Mortgage Bankers Association has indicated the effect that this urgency has on homebuyers. The firm's Purchase Index for the week of March 26 was 6.8 percent higher than that reported the previous week, bring it to the highest level since the week of October 30.
"Purchase applications have increased over the past month, and are now at their highest level since last October when many homebuyers were rushing to get loans closed before the expected expiration of the homebuyer tax credit," said Michael Fratantoni, MBA's Vice President of Research and Economics. "We may be seeing a similar pattern now, as the extended version of the tax credit ends next month."
The Market Composite Index, which measures mortgage application activity, also increased by 1.3 percent over the previous week on a seasonally adjusted basis.
Refinance activity, however, reported a decrease as several interest rates grew during that week. The average interest rate for 30-year fixed mortgages increased from 5.01 to 5.04 percent. For 15-year fixed mortgages, the average interest rate increased from 4.33 to 4.34 percent.
Average interest rates from one-year adjustable mortgages experienced the most growth, jumping from 6.75 to 6.88 percent.
Consumers with strong credit scores are often able to take advantage of the most favorable interest rates on a variety of products, from mortgages and auto loans to credit cards and insurance premiums. Obtaining a lower interest rate allows individuals to pay off their loans more quickly using more affordable payments.
Another factor pressuring homebuyers is the impending end of the Federal Reserve mortgage-backed securities purchasing program. Many economists predict that the end of this program, which is aimed at increasing stability within the housing market during the recession, will lead to an increase in interest rates.