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Overseas concerns lead to lower interest rates in the U.S.

Date posted:  9/18/14 07:45:00 AM Mortgage loan interest rates dropped at the start of October.

A weak overseas economy has helped spark U.S. interest rates to drop to their lowest levels since the summer of 2013, and that fact hasn't been lost on the nation's homeowners.

"Homeowners that have increasingly been seeking cash-out refinances may find these levels very attractive and timely, given industry changes that will reduce loan-to-values on cash-out refinances in December," Bill Banfield, vice president of Quicken Loans, told HousingWire.

The decline in interest rates has helped bring potential borrowers to the table. Mortgage applications surged 5.6 percent on a seasonally adjusted basis in the week ending Oct.10 compared to the previous week, according to data from the Mortgage Banker's Association.

Mike Fratantoni, the chief economist with MBA, agreed that a feeble economy in Europe has driven the U.S. market.

"Growing concerns about weak economic growth in Europe caused a flight to quality into U.S. assets last week, leading to sharp drops in interest rates," Fratantoni said. "Mortgage rates for most loan products fell to their lowest level since June 2013."

Watching the MBA's Index
The index for refinancing increased 11 percent from the previous week, according to the MBA's Market Composite Index, which measures the volume of mortgage loan applications. The index for purchases was also up one percent compared to the week prior on a seasonally adjusted basis.

Fratantoni said the refinance application volume hit its mark in in the U.S. since June 2014 as a result of concerns for overseas finances. He added the conventional refinance volume reached its best mark since February 2014.

Mortgage Professional America reported investors are looking to keep their money protected as best they can, which is why they are investing in mortgage-backed securities from Fannie Mae and Freddie Mac. The MPA stated bonds have also been a popular option for investors.