US home loan demand nudge higher in latest week

By Julie Haviv

NEW YORK, March 10 (BestGrowthStock) – U.S. mortgage applications
nudged up last week, reflecting increased demand for home
purchase loans even as interest rates trekked higher, data from
an industry group showed on Wednesday.

If demand for purchase loans, a tentative early indicator
of home sales, continues to climb it will bode well for the
hard-hit U.S. housing market, which remains highly vulnerable
to setbacks and heavily reliant on government intervention.

The Mortgage Bankers Association said its seasonally
adjusted index of mortgage applications (USMGM=ECI: ), which
includes both purchase and refinance loans, for the week ended
March 5, increased 0.5 percent.

The four-week moving average of mortgage applications,
which smooths the volatile weekly figures, was up 0.8 percent.

Bill Emerson, CEO of Quicken Loans in Livonia, Michigan,
said the lofty level of homes either on the market for sale or
about to hit the market through foreclosures and short sales
are the biggest threat to the U.S. housing market.

“This inventory will pressure prices, so many people are
sidelined right now, waiting for prices to fall further,” he
said.

The MBA’s seasonally adjusted purchase index (USMGPI=ECI: )
increased 5.7 percent, while its seasonally adjusted index of
refinancing applications (USMGR=ECI: ) decreased 1.5 percent.

“While many people have already refinanced over the past
year, there is still a huge amount of borrowers who can benefit
from it,” he said.

Many mortgages, however, are “under water,” he said. This
negative equity has been one of the biggest banes of
homeowners, making many unqualified for home loan refinancing
and preventing some from selling.

Borrowers in negative equity, meaning they owe more on
their mortgage than their home is currently worth, are more
prone to defaults and foreclosures.

Stricter lending standards, higher fees, and declining
incomes have also made it tougher on borrowers. Unemployment
and underemployment is another huge problem. The Labor
Department last week said the U.S. unemployment rate held
steady at 9.7 percent in February.

The MBA said borrowing costs on 30-year fixed-rate
mortgages, excluding fees, averaged 5.01 percent, up 0.06
percentage point from the previous week. Interest rates were
also above the year-ago level of 4.96 percent.

An all-time low of 4.61 percent was set in the week ended
March 27, 2009. The survey has been conducted weekly since
1990.

Mortgage rates are expected to rise when the Federal
Reserve — the U.S. central bank — stops buying
mortgage-related securities at the end of March.

“The Fed will likely take a step back to see if the private
sector steps up and starts purchasing the bonds,” Emerson said.
“If they do not, mortgage rates could move significantly
higher.”

The lowest mortgage rates in decades and high affordability
helped the hard-hit U.S. housing market find some footing in
2009 after a three-year slump. Recent data on new and existing
home sales, however, point to a sector that is still
struggling.

“It is a slippery slope right now in the housing market,”
he said.

The MBA said refinance share of mortgage activity decreased
to 67.2 percent of total applications from 69.1 percent the
previous week. The adjustable-rate mortgage, or ARM, share of
activity increased to 5.1 percent from 4.8 percent the previous
week, the highest since November 2009.

The MBA said fixed 15-year mortgage rates averaged 4.32
percent, up from 4.27 percent the previous week. Rates on
one-year ARMs increased to 6.80 percent from 6.77 percent.

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US home loan demand nudge higher in latest week