Mortgage applications in the U.S. rose for a second week as the lowest borrowing costs since May propelled a surge in refinancing.
The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan increased 4.3 percent to 514.4 in the week ended July 10, from 493.1 in the prior week. The group’s refinancing gauge jumped 18 percent, while the index of purchases fell 9.4 percent.
“We will see more refis as rates come down,” Robert Dye, a senior economist at PNC Financial Group in Pittsburgh, said before the report. “It’s nice to see mortgage rates coming down; that’ll be a linchpin for the recovery.”
Lower monthly mortgage payments will help limit the damage to household finances caused by mounting unemployment and sinking home values. Economists are incorporating an easing in the housing slump, now in its fourth year, in their forecasts of an economic recovery in the second half of 2009.
Today’s report showed the mortgage bankers’ refinancing gauge increased to 2,009.4 from the previous week’s 1,707.7. The purchase index fell to 258.8 from a three-month high of 285.6 the prior week.
Combined sales of existing and new homes climbed to a 5.1 million annual pace in May, the highest level so far this year. Purchases slumped to a 4.8 million pace in January, the lowest level since comparable records began in 1999.
Pending Sales
In another sign the housing slump may be bottoming out, a July 1 report from the National Association of Realtors showed the number of Americans signingcontracts to buy previously owned homes rose in May for a fourth consecutive month.
The share of applicants seeking to refinance loans climbed to 54.9 percent of total applications last week from 48.4 percent.
The average rate on a 30-year fixed-rate loan fell to 5.05 percent, the lowest level since the week ended May 22, from 5.34 percent the prior week. The rate reached 4.61 percent at the end of March, the lowest level since the bankers group’s records began in 1990.
At the current 30-year rate, monthly borrowing costs for each $100,000 of a loan would be $539.88, or about $74 less than the same week a year earlier, when the rate was 6.22 percent.
The average rate on a 15-year fixed mortgage fell to 4.59 percent from 4.83 percent the prior week. The rate on a one-year adjustable mortgage decreased to 6.47 percent from 6.58 percent.
‘Unwilling’ Buyers
New-home sales in the U.S. likely will remain little changed in coming months because of low consumer confidence and the difficulty would-be buyers have getting loans, Pulte Homes Inc. Chief Executive Officer Richard Dugas said at an investor conference in late June.
“Buyers are unwilling and unable to take on new mortgages,” Dugas said at a conference in Boston. “Despite the record fall in prices and the tremendous deal that consumers get relative to the 30-year mortgage rates where they are today, we’re still having difficulty convincing people to get into the market.”
The Washington-based Mortgage Bankers Association’s loan survey, compiled every week, covers about half of all U.S. retail residential mortgage originations.
