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Mortgage applications increase last week

Mortgage applications increase last week
Wed May 25, 2005 07:31 AM ET

NEW YORK (Reuters) - Applications for U.S. home mortgages increased last week amid a rise in purchasing and refinancing activity as mortgage rates eased, an industry group said on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity increased 4.3 percent to 729.6, partially offsetting the 10.5 percent decline during the previous week.

The MBA's seasonally adjusted index of refinancing applications climbed 6.4 percent 2167.9, after falling 10.0 percent the prior week.

The MBA's purchase index, a gauge of loan requests for home purchases, rose 2.8 percent to 482.3, after dropping 10.8 percent the week before.

"Rates have declined 14 basis points over the last two weeks. While the number of refinance applications increased ... the dollar volume increased by more than twice that amount, 13.5 percent, consistent with the idea that borrowers with larger balance loans respond quickly to even small rate incentives to refinance," Jay Brinkmann, vice president, in the MBA's research and economics department.

According to the MBA, fixed 30-year mortgage rates averaged 5.63 percent last week, excluding fees, down 10 basis points from 5.73 percent the previous week. Rates are lower than where they stood in early April when the fixed 30-year mortgage rate was at 5.91 percent.

Interest rates are also much lower than where they stood a year ago. The fixed 30-year mortgage rate as of May 21, 2004 was 6.26 percent, according to MBA data.

The average contract interest rate for 15-year fixed-rate mortgages also fell last week, down 4 basis points to 5.24 percent from 5.28 percent a week earlier.

Rates on one-year adjustable-rate mortgages, or ARMs, rose to 4.21 percent from 4.11 percent the prior week.

The increase in ARM rates, however, did not appear to impact demand for these loans.

Applications for ARMs rose to 34.8 percent of total applications from 33.9 percent the previous week, the MBA said.

Refinancings increased as a percentage of all mortgage applications, at 40.3 percent of total applications from 39.3 percent the previous week.

The robust report on mortgage applications came one day after the National Association of Realtors said sales of existing U.S. homes surged 4.5 percent to a record high in April.

Sales of previously owned homes rose to a seasonally adjusted annual rate of 7.18 million units last month, the trade group said, eclipsing the record of 7.02 million logged in June of last year. The figure includes both single-family homes and condominiums.

Low mortgage rates have supported the housing sector, generating economic growth in recent years. Industry analysts and economists have said they expect home sales to edge off their record 2004 levels as the Federal Reserve raises rates, but there has been little sign that demand has weakened.

More insight into the strength of the U.S. housing market will emerge at 10 a.m. (1400 GMT) with the release of data on new single-family home sales in April.

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

Respondents include mortgage bankers, commercial banks and thrifts.


LINK: http://www.reuters.com/newsArticle.jhtml;jsessionid=FKRSVCLFYOWJACRBAE0CFFA?type=topNews&storyID...