US home refinancing jumps while purchasing slumps

By Julie Haviv

NEW YORK, May 26 (BestGrowthStock) – U.S. mortgage applications to
refinance home loans jumped to a seven month high last week as
rates neared record lows, but purchase demand remained stuck at
a 13-year low.

Interest rates on 30-year fixed-rate mortgages, the most
widely used loan, reached their lowest level since
late-November 2009, the Mortgage Bankers Association said on
Wednesday. Low mortgage rates may prove to be the saving grace
for the housing market as it copes with the expiration of
popular home buyer tax credits.

The MBA said its seasonally adjusted index of mortgage
applications (USMGM=ECI: ), which includes both purchase and
refinance loans, for the week ended May 21, increased 11.3

The four-week moving average of mortgage applications,
which smooths the volatile weekly figures, was up 4.4 percent.

“Refinance application volume jumped last week as
continuing financial market turmoil related to the budget
crises in Europe extended the opportunity for homeowners to
lock in at historically low mortgage rates,” Michael
Fratantoni, MBA’s Vice President of Research and Economics,
said in a statement.

The MBA’s seasonally adjusted index of refinancing
applications (USMGR=ECI: ) increased 17.0 percent, its third
straight weekly rise, reaching the highest level since the week
ended Oct. 2009.


For a graphic on mortgage applications, click on:


Lower mortgage rates reduce monthly payments for those who
are refinancing, putting more cash into their hands to funnel
into the economy. However, many have found themselves
restricted due to tight lending standards or unemployment and
others cannot refinance because they are “underwater,” meaning
they owe more on their mortgage than their home is worth.

Ellen Bitton, president and CEO of Park Avenue Mortgage
Group in New York, said low rates have been a boon for

“Telephones are ringing off the hook for refinancing.”

“The expiration of the home buyer tax credits have reduced
the pace of purchases, particularly at the lower to middle end
of the markets,” she said.

The government’s recently expired home buyer tax credits
likely pulled some sales into April that would otherwise have
occurred in May or later. Buyers seeking to take advantage of
the tax credits had to sign purchase contracts by April 30 and
have until June 30 to close on the sales.

The MBA’s seasonally adjusted purchase index (USMGPI=ECI: ),
a tentative early indicator of home sales, decreased 3.3
percent, its third straight weekly drop, reaching the lowest
since April 1997.

A further decline in the coming weeks would point to
potentially bigger effects on home sales and construction.

The MBA said borrowing costs on 30-year fixed-rate
mortgages, excluding fees, averaged 4.80 percent, down 0.03
percentage point from the previous week, reaching the lowest
level since the week ended November 27, 2009.

Interest rates were nearly at their year-ago level of 4.81
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.

The MBA said fixed 15-year mortgage rates averaged 4.25
percent, up from 4.19 percent the previous week. Rates on
one-year adjustable-rate mortgage, or ARMs, increased to 6.83
percent from 6.81 percent.

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US home refinancing jumps while purchasing slumps