Mortgage Applications in U.S. Increased 2.1% Last Week, MBA Index Shows

Mortgage applications in the U.S. rose last week, led by a gain in purchase applications as mortgage rates approached historic lows.
By: Bob Willis: Bloomberg.com
The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan rose 2.1 percent to 613.7 in the week ended Nov. 27 from 601 the prior week.
The group’s gauge of purchases gained 4.1 percent, a second consecutive advance, while its measure of refinancing climbed 1.7 percent.

Cheaper borrowing costs and a tax credit for first-time homebuyers are giving demand a lift and may pave the way for a self-sustaining housing recovery. An unemployment rate that is forecast to exceed 10 percent through the first half of 2010 is one reason why any improvement is likely to be uneven.

“The combination of falling rates, the tax credit extension and improved affordability point toward a rebound in housing demand,” Michael Larson, a housing analyst at Weiss Research in Jupiter, Florida, said before the report. “Purchase applications should enter 2010 with the wind at their back.”

The purchase index rose to 232.3 from the prior week’s 223.1. The measure reached a 12-year low in mid-November. The mortgage bankers’ refinance gauge increased to 2866.4 last week from 2818.7, today’s report showed.

The share of applicants seeking to refinance loans rose to 72.1 percent of total applications last week.

Rates Fall

The average rate on a 30-year fixed-rate loan declined to 4.79 percent last week, the lowest since May, from 4.83 percent, according to the mortgage bankers group. The rate reached 4.61 percent at the end of March, the lowest level 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 $524, or about $43 less than the same week a year earlier, when the rate was 5.48 percent.

The average rate on a 15-year fixed mortgage fell to 4.27 percent from 4.32 percent. The rate on a one-year adjustable mortgage declined to 6.56 percent.

President Barack Obama on Nov. 6 extended the deadline for a tax credit of as much as $8,000 for first-time buyers to April 30, and added buyers who have owned a home for at least five years.

The tax credit, together with foreclosure-driven declines in prices and low rates, has helped boost housing sales from record low levels this year.

Mounting Joblessness

Even so, unemployment at a 26-year high is making most people reluctant to buy a home. Tighter credit standards are making it harder to get mortgages for those who want to buy.

Homebuilders, while seeing signs of improvement, remain cautious. Beazer Homes USA Inc. had a 2.4 percent gain in new orders in its fiscal fourth quarter, helping it post its first quarterly profit in three years, the Atlanta-based builder said Nov. 10.

“Elevated unemployment and rising foreclosure activity make it difficult to predict when and to what extent the housing market will sustainably recover,” Chief Executive Officer Ian McCarthy said in the statement.

The Washington-based Mortgage Bankers Association’s loan survey, compiled every week, covers about half of all U.S. retail residential mortgage originations.