US home loan demand up as rates near record lows

By Julie Haviv

NEW YORK, Oct 27 (BestGrowthStock) – U.S. mortgage applications for
home purchasing and refinancing rose last week as consumers
sought to take advantage of near-record low interest rates,
data from an industry group showed on Wednesday.

While the uptick bodes well for the housing market, which
has been showing signs of improvement, demand has been tepid,
reflecting the inability of many consumers to take advantage of
rock-bottom rates.

The Mortgage Bankers Association said its seasonally
adjusted index of mortgage applications (USMGM=ECI: ), which
includes purchase and refinance loans, increased 3.2 percent
for the week ended Oct. 22. The four-week moving average, which
smooths the volatile weekly figures, was up 1.4 percent.

It was only the second time in eight weeks activity rose.

Michelle Meyer, senior U.S. economist at BofA Merrill Lynch
in New York, said demand remains sluggish despite the rise.

“This implies that the soft trend in home sales should
persist amid high unemployment, tight credit and depressed
consumer confidence,” she said.

Meyer said “underwater” mortgages — where the amount owed
on the mortgage exceeds the value of the home — are one of the
biggest banes of the homeowners.

This negative equity makes many of them unqualified for
home loan refinancing and prevents some from selling.

“The refinancing index has increased notably, but still
less than to be expected given incredibly low mortgage rates,”
she said.

The MBA’s seasonally adjusted index of refinancing
applications (USMGR=ECI: ) increased 3.0 percent.

Borrowing costs on 30-year fixed-rate mortgages, excluding
fees, averaged 4.25 percent, down 0.09 percentage point from
the previous week. Interest rates were also below their
year-ago level of 5.04 percent.

Last week’s rate matched that of the week ended Oct. 1,
which was the second lowest level in the survey, which has been
conducted weekly since 1990. A record low of 4.21 percent was
reached in the week ended Oct. 8.

If home loan refinancing continues to climb it will bode
well for the flailing U.S. economy as this activity typically
encourages an increase in consumer spending.

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

The MBA’s seasonally adjusted purchase index (USMGPI=ECI: ),
a tentative early indicator of home sales, rose 3.9 percent.


For a graphic on mortgage applications, click on:


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

The tax credits pulled sales forward and activity dropped
after the expiry.

Encouraging news this week indicate this payback may be
easing. The National Association of Realtors on Monday said
sales of previously owned U.S. homes in September increased 10
percent from August.

More insight into the state of the housing market will
emerge on Wednesday when the Commerce Department releases
September new home sales data.

The MBA said fixed 15-year mortgage rates averaged 3.67
percent, down from 3.74 percent the previous week and the
second lowest on record, with the lowest being 3.62 percent two
weeks prior. Rates on one-year adjustable-rate mortgage, or
ARMs, decreased to 7.07 percent from 7.17 percent.

(Editing by Chizu Nomiyama)

(Reuters Messaging: [email protected];
email: [email protected]; Tel: +1 646 223 6153))

US home loan demand up as rates near record lows