WRAPUP 1-US home refinancing demand at highest in 15 months

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By Julie Haviv

NEW YORK, Aug 18 (BestGrowthStock) – U.S. mortgage applications
leaped last week as rock-bottom interest rates lifted demand
for home refinancing to its highest level in 15 months, a
development that could portend stronger economic growth.

Home loan refinancing puts extra cash into consumers’ hands
that can be used to pay off existing debt or funnel money into
the economy through extra spending.

By lowering a monthly mortgage payment it may also help
some homeowners avoid default and foreclosure if their credit
is good enough.

The Mortgage Bankers Association said on Wednesday its
seasonally adjusted index of mortgage applications (USMGM=ECI: ),
which includes both purchase and refinance loans, for the week
ended Aug. 13, increased 13.0 percent. The four-week moving
average of mortgage applications, which smooths the volatile
weekly figures, was up 2.6 percent.

The MBA’s seasonally adjusted index of refinancing
applications (USMGR=ECI: ) increased 17.1 percent, the biggest
jump since the week ended May 15, 2009.

“Refinancing will help free up cash for homeowners that
would have otherwise been tied into their home and this cash
could help support consumer spending, and therefore GDP, albeit
only modestly,” said Michelle Meyer, senior U.S. economist at
BofA Merrill Lynch in New York.

With investors worrying about deflation and a double-dip
recession, the first revision to second quarter GDP data, due
Friday, August 27, will be closely watched. Bank of America
Merrill Lynch forecasts a downward revision to 1.5 percent.

One sign that consumers may already be opening their
wallets emerged on Wednesday when one of the largest U.S.
retailers, Target Corp (TGT.N: ), on Wednesday, when it posted
higher quarterly earnings.

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For a graphic on mortgage applications, click on:

http://link.reuters.com/vaz55n

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MORTGAGE RATES STILL NEAR HISTORIC LOWS

The MBA said borrowing costs on 30-year fixed-rate
mortgages, excluding fees, averaged 4.60 percent, up 0.03
percentage point from the previous week’s record low. The
survey has been conducted weekly since 1990. Mortgage rates
were also below their year-ago level of 5.15 percent.

Fixed 15-year mortgage rates averaged 3.99 percent, up from
the previous week’s record low of 3.95 percent. Rates on
one-year adjustable-rate mortgage, or ARMs, decreased to 6.90
percent from 7.00 percent.

But homeowners in Florida, and other hard-hit housing
markets, are finding it difficult to refinance because
appraisals of home values are coming in significantly below the
amount owing on outstanding mortgage balances, according to
Thomas Meyer, CEO of J.I. Kislak Mortgage in Miami Lakes,
Florida, said

The housing market has been struggling since the April 30
expiration of popular home buyer tax credits. The Commerce
Department on Tuesday said U.S. housing starts rose but to a
much weaker rate than expected in July, while permits for
future home construction fell to their lowest level in more
than a year.

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.

“There is a feeling that we are at, or very close to, the
bottom in the fall of housing prices and that now is the time
to buy,” said Thomas Meyer, chief executive of J.I. Kislak
Mortgage in Miami Lakes, Florida.

But low rates failed to foster demand for loans to purchase
a home last week, with demand sliding for the first time in
five weeks, MBA data showed.

The MBA’s seasonally adjusted purchase index (USMGPI=ECI: ),
a tentative early indicator of home sales, decreased 3.4
percent. Demand is down about 42 percent since the tax credit
expiration.

The housing market is heavily reliant on mortgage finance
giants Fannie Mae and Freddie Mac, which have been under a
government conservatorship since September 2008, but their
future role is a big question mark.

The U.S. government’s role in housing finance should
undergo “fundamental change,” but it should still provide some
guarantees in the mortgage market, U.S. Treasury Secretary
Timothy Geithner said on Tuesday. For details double-click on
[ID:nN16101344].

Another reading on state of the U.S. housing market will be
published next week. The National Association of Realtors on
Tuesday will report July existing home sales which are expected
to fall, while the Commerce Department on Wednesday will
release July new home sales data which is expected to be little
changed.

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

WRAPUP 1-US home refinancing demand at highest in 15 months