More people apply for mortgage in the US

Bloomberg

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Mortgage applications in the U.S. rose for a third consecutive week as a drop in borrowing costs helped spur a wave of refinancing and encouraged purchases.

The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan soared 32 percent to 1,159.4 in the week ended March 20 from 876.9 the prior week. The group’s refinancing gauge surged 42 percent and its purchase index gained 4.2 percent.

The interest rate on a 30-year fixed loan plunged to a record low last week, the group said, prompting homeowners to refinance mortgages to trim monthly payments. Still, the housing slump may persist as foreclosures depress property values and widespread job cuts limit demand, worsening the real-estate glut.

"Lower mortgage rates will stimulate demand, but will not be enough to keep sales from sliding further over the next few months," said Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts. The mortgage bankers’ purchase index increased to 267.8 last week, from 257.1 the previous week, yesterday’s report showed. The refinancing gauge jumped to 6,363.2 from 4,497.6.

The share of applicants seeking to refinance loans rose to 78.5 percent of total applications last week, from 72.9 percent. The average rate on a 30-year fixed-rate loan fell to 4.63 percent, the lowest level since the Mortgage Bankers group began records in 1990, from 4.89 percent the prior week.

At the current 30-year rate, monthly borrowing costs for each $100,000 of a loan would be about $514, or $69 less than the same week a year earlier, when the rate was 5.74 percent.

15-year mortgages

The average rate on a 15-year fixed mortgage fell to 4.48 percent, the lowest since June 2003, from the prior week’s 4.52 percent. The rate on a one-year adjustable mortgage rose to 6.22 percent from 6.20 percent.

The Washington-based association’s loan survey, compiled every week since 1990, covers about half of all U.S. retail residential mortgage originations.

The group Tuesday boosted its forecast for 2009 home-loan originations by $800 billion to $2.78 trillion. Refinancing will total $1.96 trillion in 2009 and purchase originations will rise to $821 billion, MBA projected. The Federal Reserve last week announced a plan to increase purchases of mortgage-backed securities by up to an additional $750 billion, adding to the $500 billion it pledged between January and June. The central bank also will buy as much as $300 billion in Treasuries during the next six months.