Mortgage Applications Rise After Back-to-Back Declines

Mortgage applications in the U.S. rebounded last week after two straight declines as purchases and refinancing increased, Bloomberg Media reports.

The Mortgage Bankers Association index of applications for home purchase loans or to refinance home loans rose 3.6 percent to 575.6, up from 555.8 the previous week. On its own, the group’s index of home loan applications increased 4.3 percent, while the refinancing gauge rose 2.2 percent.

The report reinforces data last week that showed more sales of new and previously owned homes in November, suggesting the worst of the slump is over. Cheaper homes, lower mortgage rates and builder incentives will gradually lure buyers back into the market, economists said.

The Mortgage Bankers Association’s home purchase loan index increased to 406.9 last week from 390.2 a week earlier, and is up 8.3 percent from a three-year low reached at the end of October. A year earlier, the index registered 418.3.

The group’s mortgage refinance index rose to 1640.4 last week from 1604.6 the week before. It is 20 percent higher than a year earlier, which may be explained by more people eschew adjustable-rate loans in favor of fixed rates.

The number of adjustable-rate mortgages fell to 20.4 percent last week, the lowest since July 2003, from 23.1 percent, today’s report showed.

The National Association of Realtors reported last week that November sales of existing homes, which make up 85 percent of the home loan market, rose 0.6 percent, the first back-to-back monthly gain since March 2005. New home sales increased last month to an annual rate of 1.047 million.

Cheaper homes are helping the process along. The median home price of an existing single-family house fell 3.1 percent in November from a year ago to $218,000, the fourth consecutive monthly decline, the Realtors report.

The number of unsold homes, compared with the pace of sales, is starting to ease. The supply of unsold new and existing homes at the current sales rate slipped in November. Some home builders are resorting to price cuts and other incentives, such as cars, upgraded appliances and/or discounts from affiliated mortgage lenders.

Today’s report showed that the 30-year fixed mortgage rate rose to 6.22 percent, the highest in more than nine weeks, and up from 6.12 percent the prior week.

At that rate, borrowing costs for each $100,000 of a loan would be $613.77 a month. A mortgage calculator pegs that cost at $42 less than in the week ending June 23, when the rate was at a four-year high of 6.86 percent.

The rate on a 15-year mortgage climbed to 5.93 percent from 5.84 percent. The rate on one-year adjustable-rate mortgages declined to 5.84 percent from 5.87 percent.

Higher rates in recent weeks may have been discouraging refinancing of home loans. The share of applications devoted to refinancing slipped to 48.1 percent from 48.8 percent.