US mortgage demand at 6-wk highs on refinance wave

By Lynn Adler

NEW YORK, Feb 3 (BestGrowthStock) – Demand for U.S. home loans rose
to a six-week high on a mini refinance wave, with borrowers
pushing to lock in rates before they climb later this year, the
Mortgage Bankers Association said on Wednesday,

Applications to buy homes and refinance loans jumped last
week to mid-December levels as average 30-year mortgage rates
held near 5 percent.

The industry group’s mortgage index jumped 21 percent last
week, fueled by a 26.3 percent leap in demand for refinancing
as purchase loan requests increased 10.3 percent.

The 30-year mortgage rate dipped 0.01 percentage point to
5.01 percent.

But this borrowing cost was 0.40 percentage point above the
record low set last March and seen headed higher throughout the
year.

“Rates continue to hover around 5 percent, quite low by
historical standards, but are well above the record lows seen
in 2009 and hence are not generating substantial refi volume,”
said Michael Fratantoni, MBA’s vice president of research and
economics.

Last spring when mortgage rates hit rock bottom, the index
for refinance applications was more than double its current
level.

Nonetheless, as the U.S. housing market claws its way out
of the worst crash since the Great Depression there are
increasing signs that the important spring selling season could
be relatively healthy.

Affordability remains high with mortgage rates still
historically low and average home prices plunging about 30
percent from 2006 peaks before stabilizing since last summer.

The government’s bonus to first-time and move-up buyers via
a tax credit remains in place for several more months, luring
buyers who have been sitting on the sidelines waiting for some
signs of stability.

Qualified borrowers who sign purchase contracts by April 30
and close on loans by the end of June can get an $8,000
first-time buyer credit or $6,500 move-up credit.

Each set of housing data brings with it the debate about
whether this key segment of the U.S. economy can sustain once
the government incentives disappear.

A modest December rise in pending sales of existing homes,
which are based on signed contracts, after a steep November
drop suggested that the housing rebound would come in fits and
starts. Read more at [ID:nN02242571].

“I do think the housing recovery in the U.S. still has legs
and is firmly in tact,” said Ian Pollick, economics strategist
at TD Securities in Toronto. “There’s a lot of pent up demand
in the system right now, there are a lot of really really good
deals.”

The rise in mortgage rates is seen as gradual this year
with the Federal Reserve committing to keeping interest rates
low for an extended period.

One of the wild cards is the pace at which banks start
putting foreclosed properties up for sale. Those sales are also
expected to be measured, to prevent a second price swoon that
results in a double-dip for housing.

“Taken as a whole I have a big thumbs up for the housing
market,” said Pollick. “I really do think that the recovery is
sustainable and I really do think that we’ve seen the worst in
the rearview mirror.”

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US mortgage demand at 6-wk highs on refinance wave