US home refinancing demand jumps as rates hit new low

By Julie Haviv

NEW YORK, Oct 13 (BestGrowthStock) – U.S. mortgage applications for
home refinancing loans rose for the first time in six weeks,
with demand jumping to its highest level since late August as
homeowners reacted to record low interest rates, data from an
industry group showed on Wednesday.

An increase in home loan refinancing may provide a
much-needed jolt to the flailing economy as it could portend an
increase in consumer spending. By lowering monthly mortgage
payments it may also help some homeowners avoid default and
foreclosure if their credit is good enough.

The Mortgage Bankers Association on Wednesday said its
seasonally adjusted index of mortgage applications (USMGM=ECI: ),
which includes both purchase and refinance loans, for the week
ended Oct. 8 increased 14.6 percent. The four-week moving
average of mortgage applications, which smooths the volatile
weekly figures, was up 3.0 percent.

The MBA’s seasonally adjusted index of refinancing
applications (USMGR=ECI: ) increased 21.0 percent, reaching the
highest level since the week ended August 27.

“Refinance application volumes are now close to the
highest level this year,” Michael Fratantoni, the MBA’s vice
president of research and economics, said in a statement.

“Purchase activity remains generally weak, but applications
for conventional purchase mortgages are now at their highest
level since the beginning of May following the expiration of
the tax credit,” he said.

The housing market has been struggling since the April 30
expiration of popular home buyer tax credits. 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.

Alan Rosenbaum, president of Guardhill Financial, a New
York-based mortgage banker and brokerage company, said mortgage
refinancing activity gained strength as rates dropped, but
tight lending standards are preventing many homeowners from
taking advantage of rock-bottom rates.

“The lower interest rates on mortgages have spurred
refinancing and purchase activity, though not currently as much
as hoped for,” he said.

“The government states that they want to keep rates low so
that homeowners will buy and refinance to spur the economy, but
they continue to keep underwriting guidelines too strict for
most Americans to qualify for a mortgage,” he said.

The MBA’s seasonally adjusted purchase index (USMGPI=ECI: ),
a tentative early indicator of home sales, decreased 8.5
percent, reaching the lowest level since the week ended Sept.

Rosenbaum said purchase activity would increase if there
were more incentives to buy real estate, but homeowners are
uncertain as to the direction of the economy.

“Many homeowners are waiting for the elections next month
hoping that more certainty about taxes, bank regulations and
other factors will give Americans confidence to move forward
with important monetary decisions,” he said.

Borrowing costs on 30-year fixed-rate mortgages, excluding
fees, averaged 4.21 percent, down 0.04 percentage point from
the previous week. That is a lowest level in the survey, which
has been conducted weekly since 1990.

Interest rates were also below their year-ago level of 5.02


For a graphic on mortgage applications, click on:


The MBA said fixed 15-year mortgage rates averaged 3.62
percent, down from the previous week’s 3.73 percent, a record
low. Rates on one-year adjustable-rate mortgage, or ARMs,
increased to 7.03 percent from 7.11 percent.

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

US home refinancing demand jumps as rates hit new low