Julie Haviv
USA Today
NEW YORK — Mortgage applications jumped 12.8% last week as interest rates fell below 5%, the Mortgage Bankers Association said Wednesday.
The association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week to Sept. 18 was at the highest level since the week ended May 22.
While consumers clamored for home refinancing loans, their appetite was also robust for applications to buy a home, a tentative early indicator of sales. The overall trend bodes well for the hard-hit U.S. housing market, which has been showing signs of stabilization.
Eric Belsky, executive director at Harvard University‘s Joint Center for Housing Studies, said several months of improvement in new and existing home sales is a positive sign.
“Low interest rates on mortgages are important to the fledgling housing recovery,” he said, and this has made a significant impact on the affordability front.
“While an uptick may bring buyers anxious that rates will keep rising into the market temporarily, a material increase in rates could threaten the rebound,” he said.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 4.97% the week ended Sept. 18, down 0.11 percentage point from the prior week and the first time since the week of May 22 the rate on this most widely used home loan was below 5%.
However, the rate remained above the all-time low of 4.61% set the week ended March 27. The survey has been conducted weekly since 1990. Interest rates were well below year-ago levels of 6.08%.
The average interest rate for 15-year fixed-rate mortgages remained unchanged at 4.41%, with points decreasing to 1.05 from 1.12.
The average interest rate for one-year ARMs slid to 6.52% from 6.61%, with points increasing to 0.28 from 0.20.
The government has embarked on an aggressive plan to bring mortgage rates down to levels that would spur demand.
Low mortgage rates, high affordability and an $8,000 tax credit for first-time home buyers — part of the government’s stimulus bill — have helped stabilize the market.
But with the first-time home buyer tax credit set to end Nov. 30 and distressed properties making up a high proportion of sales, there is uncertainty about the long-term outlook.
“While it is by no means a slam-dunk, it does feel increasingly likely that the tax credit will be extended beyond the end of November or revived some time next year,” said Celia Chen, senior director of housing economics at Moody’s Economy.com in West Chester, Pa.
The MBA’s seasonally adjusted purchase index rose 5.6% to 288.3, driven by applications for government-insured loans. The government purchase index was at the highest level ever recorded in the survey and the share of purchase applications that were government-insured was 45.7%, highest share since November 1990, the MBA said.
The four-week moving average of mortgage applications, which smooths volatile weekly figures, was up 4.3%.
The MBA’s seasonally adjusted index of refinancing applications increased 17.4% to its highest since the week ended May 29.
The refinance share of applications increased to 63.8% from 61.0% the previous week, but remained significantly lower than the peak of 85.3% the week ended Jan. 9. The adjustable-rate mortgage share of activity increased to 6.7%, up from 6.0% the prior week.
Copyright 2009 Reuters Limited.