MBA Mortgage Applications
U.S. MBA's Mortgage Applications Index Rose 5.2% Last Week
by Courtney Schlisserman
Dec. 7 (Bloomberg) -- An index of mortgage applications rebounded last week from the lowest level since January, reflecting increases in refinancing and home purchases, a private group's survey showed.
The Mortgage Bankers Association said today that its measure of applications rose 5.2 percent to 656.7 in the week ended Dec. 2, from 624.1 in the week that included the Thanksgiving Day holiday. The group's gauge of purchases increased to the highest level since mid-October.
Rising mortgage rates may be persuading people to buy homes now in anticipation of even higher borrowing costs next year, economists said. The average 30-year fixed rate would have to rise to more than 7.5 percent for housing to falter, according to Bob Walters, chief economist at Quicken Loans.
``Interest rates are very, very low, and as long as that's the case it's unlikely that housing will'' slump, Walters said. ``There are going to be some natural effects weighing on housing like higher prices pricing people out of the market.''
Livonia, Michigan-based Quicken is the nation's largest online mortgage lender, according to National Mortgage News.
The mortgage bankers group's purchase index rose to 495.1, the highest since the week ended Oct. 14, from 476.2 the week before. The refinancing gauge increased 7.6 percent to 1596.4 from 1484.3.
The average rate on a 30-year fixed mortgage rose to 6.32 percent last week from 6.2 percent the week before, today's report showed. Rates have risen in 10 of the last 13 weeks.
Mortgage Rates
At the current 30-year fixed rate, borrowing costs for each $100,000 of a loan would be $620.28 a month. That compares with $536.21 when the rate was a 40-year low of 4.99 percent in June 2003.
``Mortgage rates will increase maybe 50 to 60 basis points from where they are today,'' Wells Fargo & Co. Chief Executive Richard Kovacevich said in an interview yesterday. ``That's an increase, but we don't see any reason why you should see over 7 percent on 30-year mortgages next year. We think maybe 6.5 percent to 7 percent.''
Wells Fargo is the fifth-biggest U.S. bank by assets. A 51 percent jump in mortgage loans helped Wells Fargo post a record third-quarter profit of $1.98 billion, the company said in October.
The average rate on a one-year adjustable rate mortgage rose to 5.49 percent from 5.39 percent the previous week. The rate on a 15-year loan was 5.84 percent, up from 5.72 percent.
Federal Reserve
The share of total applications that were for adjustable rate mortgages rose to 33.1 percent from 33 percent a week earlier. Those for refinancing increased to 41 percent last week from 39.1 percent.
Federal Reserve policy makers have raised interest rates 12 times since June of last year to keep inflation from accelerating. Economists forecast the Fed to boost their benchmark interest rate a quarter percentage point to 4.25 percent at its Dec. 13 meeting.
``Housing and energy prices continue to be the focus of our attention,'' Fed Governor Mark Olson said in Sioux Falls, South Dakota, on Dec. 5. ``The increase in housing values has clearly flattened in some markets.''
U.S. house prices rose 12 percent in the third quarter from a year earlier, slowing from the biggest year-over-year increase in 26 years in the previous three months, the Office of Federal Housing Enterprise Oversight said on Dec. 1. Housing affordability was at a 14-year low from July through September.
Sales
``People have been hearing there's a bubble out there for so long that they're being more cautious now,'' said Brenda Shipplett, president of Fairfax, Virginia-based Long & Foster Real Estate Inc.
Sales of new and existing homes probably will fall 8.5 percent to 7.56 million in 2006 after reaching a record 8.26 million this year, Fannie Mae said on Nov. 15. Contracts to buy previously owned homes fell 3.2 percent in October, the National Association of Realtors said yesterday.
The Mortgage Bankers Association survey covers about half of all U.S. retail residential mortgage originations and has been compiled every week since 1990.
©2005 Bloomberg L.P.
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