Tags: Mortgage | Applications | Increase

Mortgage Applications Increase for First Time in Six Weeks

Wednesday, 13 Oct 2010 07:34 AM

U.S. mortgage applications for home refinancing loans rose for the first time in six weeks, with demand jumping to its highest level since late August as homeowners reacted to record low interest rates, data from an industry group showed on Wednesday.

An increase in home loan refinancing may provide a much-needed jolt to the flailing economy as it could portend an increase in consumer spending.

By lowering monthly mortgage payments it may also help some homeowners avoid default and foreclosure if their credit is good enough.

The Mortgage Bankers Association on Wednesday said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended Oct. 8 increased 14.6 percent.

The four-week moving average of mortgage applications, which smoothes the volatile weekly figures, was up 3.0 percent.

The MBA's seasonally adjusted index of refinancing applications increased 21.0 percent, reaching the highest level since the week ended August 27.

"Refinance application volumes are now close to the highest level this year," Michael Fratantoni, the MBA's vice president of research and economics, said in a statement.

"Purchase activity remains generally weak, but applications for conventional purchase mortgages are now at their highest level since the beginning of May following the expiration of the tax credit," he said.

The housing market has been struggling since the April 30 expiration of popular home buyer tax credits.

To take advantage of the tax credits, buyers had to sign purchase contracts by April 30.

Contracts originally had to close by June 30, but that was extended by three months.

Alan Rosenbaum, president of Guardhill Financial, a New York-based mortgage banker and brokerage company, said mortgage refinancing activity gained strength as rates dropped, but tight lending standards are preventing many homeowners from taking advantage of rock-bottom rates.

"The lower interest rates on mortgages have spurred refinancing and purchase activity, though not currently as much as hoped for," he said.

"The government states that they want to keep rates low so that homeowners will buy and refinance to spur the economy, but they continue to keep underwriting guidelines too strict for most Americans to qualify for a mortgage," he said.

The MBA's seasonally adjusted purchase index, a tentative early indicator of home sales, decreased 8.5 percent, reaching the lowest level since the week ended Sept. 24.

Rosenbaum said purchase activity would increase if there were more incentives to buy real estate, but homeowners are uncertain as to the direction of the economy.

"Many homeowners are waiting for the elections next month hoping that more certainty about taxes, bank regulations and other factors will give Americans confidence to move forward with important monetary decisions," he said.

Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 4.21 percent, down 0.04 percentage point from the previous week.

That is a lowest level in the survey, which has been conducted weekly since 1990. Interest rates were also below their year-ago level of 5.02 percent.

The MBA said fixed 15-year mortgage rates averaged 3.62 percent, down from the previous week's 3.73 percent, a record low.

Rates on one-year adjustable-rate mortgage, or ARMs, increased to 7.03 percent from 7.11 percent.

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U.S. mortgage applications for home refinancing loans rose for the first time in six weeks, with demand jumping to its highest level since late August as homeowners reacted to record low interest rates, data from an industry group showed on Wednesday. An increase in home...
Mortgage,Applications,Increase
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2010-34-13
Wednesday, 13 Oct 2010 07:34 AM
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