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US mortgage applications rise as interest rates drop-MBA

Thu, Nov 13 2008, 12:15 GMT
http://www.afxnews.com

NEW YORK, Nov 13 (Reuters) - U.S. mortgage applications rose last week, recovering from an almost 8-year low, as potential borrowers took advantage of a sharp drop in interest rates, an industry group said on Thursday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended Nov. 7 increased 11.9 percent to 425.0, up from the previous week when the reading reached its lowest level since December 2000.

Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.24 percent, down 0.23 percentage point from the previous week.

It was the largest interest rate drop since the week ended Sept. 12 when it fell by 0.24 percentage point to 5.82 percent.

Interest rates are below the peak of 6.59 percent reached during the summer, but above the 2008 low of 5.49 percent in January, according to the trade group.

Interest rates were below year-ago levels of 6.19 percent.

Treasury yields, which are linked to mortgage rates, have fluctuated sharply in recent months, causing home loan demand to shift sharply on a weekly basis.

The MBA's seasonally adjusted purchase index rose 9.0 percent to 284.4. The index came in well below its year-ago level of 432.6, a drop of 34.3 percent.

Overall mortgage applications last week were 39.9 percent below their year-ago level. The four-week moving average of mortgage applications, which smooths the volatile weekly figures, was down 3.7 percent.

WEEKLY REFINANCING ACTIVITY JUMPS

The group's seasonally adjusted index of refinancing applications jumped 16.1 percent to 1,248.4. The index was down 46.1 percent from its year-ago level of 2,315.7.

The refinance share of applications increased to 45.1 percent from 42.9 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 2.3 percent, down from 2.5 percent the previous week.

Fixed 15-year mortgage rates averaged 5.90 percent, down from 6.14 percent the previous week. Rates on one-year ARMs decreased to 6.77 percent from 6.86 percent.

The U.S. housing market is currently suffering the worst downturn since the Great Depression. A huge supply of unsold homes, tighter lending standards and record foreclosures have pushed down home prices, deflating a bubble from the early part of this decade.

While U.S. housing market indexes tend to be volatile, data from the MBA may help gauge how the hard-hit sector is faring.

(Reporting by Julie Haviv) Keywords: USA ECONOMY/MORTGAGES

(Reuters Messaging: julie.haviv.reuters.com@reuters.net; e-mail: julie.haviv@thomsonreuters.com; +1-646-223-6153)

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