Mortgage Applications Rise as Falling Rates Encourage Refinancing

Applications for U.S. home mortgages rose last week to their highest level since January as falling interest rates encouraged more loan refinancing, data from an industry group showed Wednesday.

The seasonally-adjusted index of total mortgage applications increased 4.3 percent in the week ended November 10 to 647.5, according to the Mortgage Bankers Association. The four-week moving average for the applications index hit 606.8, up 2.6 percent on the week.

Residential mortgage refinancing surged to its fastest rate since October 2005. People looking to refinance home loans accounted for 48 percent of applications, the most since February 2005.

Much of the refinancing at Countrywide, the largest U.S. mortgage lender, has been homeowners exiting adjustable loans taken out when interest rates were lower, said the company’s CEO, Angelo Mozilo.

“Borrowers are proactively refinancing in advance of indexed ARM resets,” he said at an investor conference in New York on Tuesday. “There’s a high level of consumer awareness.”

At least $1.1 trillion in adjustable-rate mortgages are due to reset in 2007 unless people refinance. Many of the loans are indexed to short-term home loan rates tied to the Federal Reserve’s federal funds target, which has climbed to 5.25 percent from 1 percent in early 2004.

The MBA’s gauge of mortgage refinancing jumped 6.5 percent to 2,022.2, the group said, adding that its index of home purchase loans increased 2.7 percent to a four-month high of 412.9.

Long-term, 30-year fixed-rate mortgage rates dropped 9 basis points to 6.15 percent, the lowest since January. The average rate on a mortgage whose rate adjusts each year declined to 5.87 percent from 5.89 percent.