US mortgage applications soar on refinance demand

By Lynn Adler

NEW YORK, July 7 (BestGrowthStock) – Refinancing drove total U.S.
mortgage applications to a nine-month high last week, while
demand for loans to purchase homes sunk to a near 13-year low
as buyers remained sidelined after the expiration of federal
tax credits.

Mortgage rates stuck around record lows, the Mortgage
Bankers Association said on Wednesday, giving homeowners
another chance to cut monthly payments by refinancing.

Refinancing requests jumped 9.2 percent in the week ended
July 2 to the highest level since May 2009, lifting total
applications by 6.7 percent, seasonally adjusted, to the
highest level since early October 2009.

Demand for mortgages to buy homes slipped 2 percent. It was
the eighth weekly drop in the nine weeks since the federal tax
credits for homebuyers expired on April 30.

“For the month of June, purchase applications declined
almost 15 percent relative to the prior month and were down
more than 30 percent compared to April, the last month in which
buyers were eligible for the tax credit,” Michael Fratantoni,
MBA’s vice president of research and economics, said in a
statement.
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See related graphic: http://link.reuters.com/vad26m
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The average 30-year mortgage rate was little changed in the
week ended July 2, climbing 0.01 percentage point to 4.68
percent.

The borrowing rate lingered just above the record low of
4.61 percent set in March 2009, according to the MBA’s records
that date back to 1990. Fifteen-year mortgage rates rose to
4.11 percent last week from the record low 4.06 percent set the
prior week.

Refinancings accounted for 78.7 percent of all applications
last week, the highest share since April 2009, the industry
group said.

Tepid employment growth and a surprisingly steep slump in
pending home sales kept interest rates low. [ID:nN01165161]
[ID:nN01205635]

Home purchases will stay weak over the next few months as
the housing market adjusts to the end of government incentives,
and prices should bottom around the third quarter, said Robert
Andrews, senior research analyst at IBISWorld in Santa Monica,
California.

Fallout from record defaults and foreclosures are also
likely to sway many younger buyers from making such a big
commitment in the near term, he said.

“People in my generation, people 20 to 30 years old, saw
the downside risk associated with housing, so I think there’s
going to be a bit weaker demand over the next few years,” said
Andrews.

Refinancing, likewise, is unlikely to approach the levels
seen last year when mortgage rates were near current levels.
Borrowers who could qualify for refinancing have in most cases
already refinanced, most analysts agree.
(Editing by Leslie Adler)

US mortgage applications soar on refinance demand