Mortgage rates are so low! So why aren’t people applying for mortgages?

Since last August, America has yet again fallen into another economic slump. It somehow seems all too soon with the 2008 recession still fresh on our minds, but with the ongoing debt issue in Greece and the instability of the European market, it seems rumors about another recession may not be too far from the mark.


One consequence of a bad economy is of course, a poor housing market. This results in lowered mortgage rates, making today the perfect opportunity for home buyers and refinancers to take on a new mortgage. And if that isn’t enough, large banks are now slashing fees on closing costs, making the acquisition of a new home more affordable than ever.


Recently, Capital One Bank waived some of their closing fees for refinancers, resulting in a whopping savings of $3,300 on the average. Bank of America and Citibank also placed a discount on their fees by as much as 0.75 percentage points. Mortgage rates are also hitting record lows week after week. Just a few days ago the benchmark 30-year fixed rate mortgage fell to 4.21 percent, this is one of the lowest rates that the nation has ever seen for the past 50 years. However, despite these ridiculously low rates and tempting offers, bankers remain puzzled by the lack of mortgage applications. The question now is, why aren’t mortgage applications coming in by the bulk?

So why aren’t people applying for mortgages?


There are several reasons why mortgage applicants are keeping their feet out of the water. First of



Well, Bank of America thinks that you should just accept it and they are about to introduce a fee increase. Soon, Bank of America customers will have to pay an additional $5 a month in order to make purchases with their debit cards.


Debit cards have become more and more popular over the past decade, and millions of people use their debit card as their primary means of payment. Only a relative few rely on cash in this day and age. Many people have their paychecks deposited directly into their bank accounts.


While many of us use credit cards for large purchases or repeat purchases like gas or groceries, the ever present threat of going into debt combined with high interest rates has lead many people to rely on their debit cards. In fact, many people can hardly imagine using anything else since debit cards and banks accounts are tied so closely together.


In many situations, it is very smart to use your debit card for your purchases. Especially since, in the past, you have not had to worry about paying an extra fee for using your debit card. Most importantly, your debit card only accesses the funds that you have. This helps you stick to your budget, and it keeps you from spending beyond your means.


Many people, who have had problems with debt in the past, now use their debit card exclusively and do not have a credit card, except for emergencies.   This is only one example of a recent move by banks to create and increase their fees. This trend is likely the result of the Feds capping the fees that banks can collect from the use of debit cards. Every time you use your debit card at a store, the bank collects a fee from the store. The amount of money that they can make per transaction has been limited to twenty-four cents, which is about twenty cents lower than the previous average amount.


How I saved my family $270,000!

What a title!  Honestly the number is more like $267,793.86 but $270,000 sounded so much better.


You may be wondering how in the world did YFS (Your Finances Simplified) pull that off?  What did he do?


The answer is simple.  I refinanced my home from a 30-year fixed mortgage with a 5.25% annual percentage rate to a 15-year fixed mortgage with an annual percentage rate of 3.375%.


I’m kicking myself because we could afford a 15-year mortgage all along but decided to go with a 30-year mortgage for “flexibility”.  Thank goodness we didn’t spend the difference on something frivolous or unnecessary.  So I did what my fellow blogger Ramit Sethi talked about in his article "Use barriers to prevent yourself from spending money".  I used the 15-year mortgage as a barrier.Details please!   Our current mortgage payment breaks down in the following manner:


  • Principal = $488.74
  • Interest = $1,557.17
  • Escrow = $509.44
  • Total Amount = $2,555.35


  The new mortgage payment breaks down in the following manner:


1 168 169 170

Teach me how to improve my finances, 

so that I can buy a home

and stop wasting my money on rent