US mortgage applications index gains as costs lower

Bloomberg

The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan increased 2 percent to 979.7 in the week ended May 1 from 960.6 a week earlier. Purchase applications rose 5 percent while requests to refinance climbed 1.2 percent.

Americans are taking advantage of cheaper mortgage borrowing costs to purchase homes or refinance out of adjustable-rate loans before they reset. Still, rising unemployment and tight credit mean any recovery in housing is likely to be drawn out.

"The refinancing boom will persist as homeowners take advantage of lower conforming mortgage rates," Michelle Meyer, an economist at Barclays Capital in New York, said before the report. "We believe home sales are close to a bottom."

The purchase applications gauge rose to 264.3 last week from 251.6, the mortgage bankers said, while the refinancing index increased to 5,169.3, more than double the level from a year ago.

The average rate on a 30-year fixed mortgage rose to 4.79 percent from 4.62 percent in the prior week. The rate fell to 4.61 percent in late March, the lowest level since the mortgage bankers group began records in 1990.

At the current 30-year rate, monthly borrowing costs for each $100,000 of a loan would be about $524, or $70 less than the same week a year earlier, when the rate was 5.91 percent.

The average rate on a 15-year fixed mortgage rose to 4.57 percent from 4.45 percent, while the rate on a one-year adjustable mortgage rose to 6.36 percent from 6.23 percent. The Federal Reserve last week refrained from increasing purchases of Treasuries and mortgage securities, while signaling it stood ready to boost purchases depending on market conditions. Such purchases, begun late last year, have driven mortgage rates to their recent lows.

The increase in applications may not completely translate into an improvement of market conditions. A larger share of banks reported tightened terms on residential mortgages compared with the previous survey, the central bank said this week. At the same time, about 35 percent of domestic respondents saw increased demand for prime mortgages, the first increase in at least two years, the Fed said.

Homebuilders are among industries that continue to suffer. D.R. Horton, the largest U.S. homebuilder by market value, on Tuesday reported a quarterly loss that exceeded analysts’ estimates.

"Market conditions in the homebuilding industry are still challenging," Chairman Donald Horton said.