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Mortgage Applications Increased Last Week

Mortgage Applications Increased Last Week
Wednesday April 27, 7:06 am ET

NEW YORK (Reuters) - Applications for U.S. home mortgages increased last week, as refinancing and purchasing activity rose amid lower interest rates on loans, an industry group said on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity increased 5.9 percent to 712.4, more than offsetting the decline of 1.6 percent the previous week.

The MBA's seasonally adjusted index of refinancing applications rose 9.8 percent to 2052.5, after falling 1.6 percent the prior week.

"With a 9.8 percent increase in applications, refinance activity is at its highest level since March 11," Michael Cevarr, MBA's director of member surveys, said in a press release.

"However, refinance applications volume is down 14.6 percent from one year ago," he said.

The MBA's purchase index, a gauge of loan requests for home purchases, climbed 3.3 percent to 482.0, after it dropped 1.6 percent the week before.

Lower mortgage rates on fixed and adjustable-rate loans may have spurred the uptick in demand.

According to the MBA, fixed 30-year mortgage rates averaged 5.75 percent last week, excluding fees, down 8 basis points from 5.83 percent the previous week.

Rates are lower than where they stood a year ago. The fixed 30-year mortgage rate as of April 23, 2004 was 6.01 percent, MBA data showed.

The average contract interest rate for 15-year fixed rate mortgages decreased last week to 5.33 percent from 5.40 percent a week earlier.

Rates on one-year adjustable-rate mortgages (ARMs) fell to 4.15 from 4.22 percent the prior week.

ARM applications share of activity decreased to 34.7 percent of total applications from 35.4 percent the previous week, the MBA said.

Refinancings, however, increased as a percentage of all mortgage applications, rising to 39.3 percent of total applications from 38.0 percent the previous week.

The strong MBA report comes on the heels of other robust data on the U.S. housing market this week.

Sales of new U.S. homes jumped 12.2 percent in March to a 1.431 million annualized unit pace, striking a record high, as sales increased in three of four regions, the Commerce Department said Tuesday.

The increase was the largest monthly jump since September 1993, when new home sales rose 12.6 percent.

The bullish data on housing came one day after the National Association of Realtors said sales of existing U.S. homes rose in March to their third-highest level on record.

Industry analysts and economists have been expecting home sales to fall from their record 2004 levels as the Federal Reserve raises rates, but demand has not weakened.

"The topping out proposition we were talking about earlier this year is probably not valid. We will see a slowdown. For now, we are now assured of sustained sales into mid-year," Richard Dekaser, chief economist at National City Corp., said Monday.

"In April, we have seen two things: rates moved down substantially. and we have observed a strong wave of mortgage applications. Regardless of what happens in April, they suggest strong sales for May and June," he said.

The MBA's survey covers approximately 50 percent of all U.S. retail residential mortgage originations, and has been conducted weekly since 1990.

Respondents include mortgage bankers, commercial banks and thrifts.


LINK: http://biz.yahoo.com/rb/050427/economy_mortgages.html?.v=2