U.S. MBA Mortgage Applications Index Increased 21% Last Week
By Bob Willis
Feb. 3 (Bloomberg) -- The number of mortgage applications in the U.S. rose 21 percent last week to the highest level in more than a month as refinancing rebounded.
The Mortgage Bankers Association’s index rose to 620.7 in the week ended Jan. 29 from 513 in the prior week. The group’s refinancing gauge increased 26 percent, while the purchase gauge rose 10 percent.
The gain in purchase applications may be the first sign a renewed and expanded government tax credit is stirring demand after sales dropped late last year on expectations the incentive would expire. The market, faced with mounting foreclosures and 10 percent unemployment, may need continued government assistance to sustain gains in the second half of 2010.
“Both mortgage rates and house prices remain low, but the market lacks a catalyst for a vigorous recovery,” Michael Larson, an analyst at Weiss Research in Jupiter, Florida, said before the report. “We’re muddling through.”
The mortgage bankers group’s refinancing gauge increased to 2,854.8 from 2,260.4 the prior week. The purchase index rose to 237.8 from 215.6.
The average rate on a 30-year fixed loan fell to 5.01 percent from 5.02 percent the prior week, the group said. The rate reached 4.61 percent at the end of March, the lowest since the group’s records began in 1990.
At the current 30-year rate, monthly borrowing costs for each $100,000 of a loan would be $537.43, or about $17 less than a year ago, when the rate was 5.29 percent.
Locking In Rates
Homeowners may be trying to get a jump on a possible increase in mortgage rates after Federal Reserve policy makers last week reiterated a pledge to withdraw support for the market by March 31.
“There may be greater urgency to refinance now because the door to cheap mortgage money may close,” Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report.
Home sales dropped as the expected expiration of the government tax credit at the end of November approached. Purchases of existing homes plunged 17 percent in December after rising 28 percent the prior three months as buyers tried to close before the deadline. New home sales fell 16 percent in the last two months of 2009.
The average rate on a 15-year fixed mortgage fell to 4.33 percent from 4.34 percent a week earlier, the mortgage bankers’ group said. The rate on a one-year adjustable mortgage decreased to 6.70 percent last week from 6.84 percent.
Refinancing Share
The share of applicants seeking to refinance a loan rose to 69.2 percent last week, the highest level in five weeks, from 67.6 percent the prior week.
Homebuilders are seeing some signs of improvement. D.R. Horton Inc., the second-largest U.S. homebuilder by revenue, reported its first quarterly profit since 2007 on sales and profit margins that exceeded analysts’ estimates.
“Our goal this year is profitability in each and every quarter and for the entire fiscal year,” Donald J. Tomnitz, president and chief executive officer, said during an earnings call yesterday. “We expect our September quarter will be the most challenging as a tax credit support for home sales will have expired.”
The Washington-based Mortgage Bankers Association’s loan survey, compiled every week, covers about half of all U.S. retail residential mortgage originations.
To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net
Last Updated: February 3, 2010 07:00 EST
