US home loan demand rises as rates stay near lows

By Julie Haviv

NEW YORK, Nov 10 (BestGrowthStock) – U.S. mortgage applications
rose last week, driven by higher demand for both home purchase
and refinance loans, as interest rates remained near record
lows, an industry group reported on Wednesday.

The Mortgage Bankers Association said its seasonally
adjusted index of mortgage applications (USMGM=ECI: ), which
includes purchase and refinance loans, increased 5.8 percent
for the week ended Nov. 5. It was only the third time in eight
weeks that activity rose.

The four-week moving average, which smooths the volatile
weekly figures, was down 1.9 percent.

“The increases in purchase applications we have seen over
the past couple of weeks align with the better-than-expected
news from October’s employment report and other data indicating
some improvement in the economy’s growth prospects,” Michael
Fratantoni, the MBA’s vice president of research and economics,
said in a statement.

“Refinance applications increased as rates continued to
hover near record lows,” he said.

The MBA’s seasonally adjusted index of refinancing
applications (USMGR=ECI: ) increased 6.0 percent. The seasonally
adjusted purchase index (USMGPI=ECI: ), a tentative early
indicator of home sales, rose 5.5 percent.

Borrowing costs on 30-year fixed-rate mortgages, excluding
fees, averaged 4.28 percent, unchanged from the previous week.
Interest rates were also below their year-ago level of 4.90

In the week ended Oct. 8, the rate reached 4.21 percent,
the lowest level in the survey, which has been conducted weekly
since 1990.


For a graphic on mortgage applications, click on:


Cameron Findlay, chief economist at in
Charlotte, North Carolina, said loan demand has been
constrained, even though many homeowners with mortgages that
originated in 2009 or before have an incentive to refinance.

“Lending standards are extremely tight, which is preventing
many homeowners from taking advantage of low interest rates,”
he said in an interview before the release of the MBA data.

“Consumers are also in a de-leveraging mode and they would
rather pay down their debt than buy a new home, keeping demand
for home purchase loans muted,” he said.

The housing market has been struggling since the expiry of
popular home buyer tax credits earlier this year.

Findlay said “underwater” mortgages — where the amount
owed on the mortgage exceeds the home’s value — are one of the
biggest banes of the homeowners who want to refinance.

This negative equity makes many homeowners unqualified for
refinancing and prevents some from selling.

The MBA said fixed 15-year mortgage rates averaged 3.64
percent, unchanged from the previous week. A record low of 3.62
percent was set four weeks earlier.

The rate on one-year adjustable-rate mortgage, or ARMs,
decreased to 7.08 percent from 7.18 percent a week ago, the MBA
(Editing by Leslie Adler)

US home loan demand rises as rates stay near lows