US home refinancing demand up, rates hit new lows

By Julie Haviv

NEW YORK, Aug 25 (BestGrowthStock) – U.S. mortgage applications
rose last week as record low rates lifted demand for home
refinancing loans to its highest level in over 15 months, a
development that could provide a much-needed jolt to the
economy.

Home loan refinancing puts extra cash into consumers’ hands
that they can save, use to pay off existing debt or funnel into
the economy through extra spending.

With worries of deflation and a double-dip recession
rising, an uptick in consumer spending could be just what the
flailing economy needs.

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 Aug. 20 increased 4.9 percent. The four-week moving
average of mortgage applications, which smooths the volatile
weekly figures, was up 5.0 percent.

The MBA’s seasonally adjusted index of refinancing
applications (USMGR=ECI: ) increased 5.7 percent, reaching the
highest since the week ended May 1, 2009.

“The volume of refi applications last week was up 26
percent over their level four weeks ago,” Michael Fratantoni,
the MBA’s Vice President of Research and Economics, said in a
statement.

“With rates this low, many borrowers who refinanced in the
past two years may well have an incentive to refinance again,
and this is likely increasing refi application activity,” he
said.

The housing market has been struggling since the April 30
expiration of popular home buyer tax credits. The National
Association of Realtors on Tuesday said sales of previously
owned U.S. homes took a record plunge in July to their slowest
pace in 15 years.

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.

More insight into the U.S. housing market will emerge on
Wednesday when the Commerce Department releases July new home
sales data.

Borrowing costs on 30-year fixed-rate mortgages, excluding
fees, averaged 4.55 percent, down 0.05 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 5.24
percent.

Paul Anastos, president of Mortgage Master in Walpole,
Massachusetts, said overall production at his company has
almost doubled in the last two months with 76 percent of the
total new applications being for home refinancing loans.

“Our overall volume is dominated by refinances due to
historically low rates, but pure purchase volume has remained
consistent in recent months and I believe it could actually
increase as we enter the fall purchase market,” he said.

“If rates stay low as we head into the fall, I believe
there will be a nice little increase in purchase applications
given these low rates and the values available in the market,”
he said.

Rock bottom rates, however, failed to make a significant
impact on demand for loans to purchase a home last week.

The MBA’s seasonally adjusted purchase index (USMGPI=ECI: ),
a tentative early indicator of home sales, increased 0.6
percent.
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For a graphic on mortgage applications, click on:
http://link.reuters.com/nyw86n

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The MBA said fixed 15-year mortgage rates averaged 3.91
percent, down from the previous week’s 3.99 percent, a record
low. Rates on one-year adjustable-rate mortgage, or ARMs,
decreased to 6.84 percent from 6.90 percent.

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

US home refinancing demand up, rates hit new lows