Mortgage Loan Applications Continue to Rise

With mortgage rates falling to the lowest level in three months, mortgage applications rose, as they typically do, to the highest level in three months last week, the Mortgage Bankers Association reports.

Total applications - including home purchase loan and mortgage refinance products - increased by 2.8 percent week-over-week and are up 19 percent compared with the same week a year ago.

The number of applications to refinance an existing mortgage loan rose 3.5 percent to their highest levels in 18 months and are now up about 46 percent compared with the same week a year ago.

Overall, mortgage refinancing accounted for 46.2 percent of applications, up a tenth of a percent from the previous week’s survey.

The volume of requests for home loans to purchase a home increased by 2.2 percent to the highest level in two months. In all, home purchase loans have risen almost 3 percent compared with a year ago.

By contrast, home sales are down markedly from the same time last year. As applications rose, throughout the U.S., mortgage rates remained mixed.

The average rates for a 30-year, fixed-rate home loan fell to just 6.03 percent from 6.04 percent. At the same time, the average rates for a 15-year fixed-rate mortgage rose to 5.78 percent from 5.73 percent.

Average rates for one-year adjustable-rate mortgages rose to 5.86 percent from 5.79 percent. The spread between a 30-year fixed-rate and a one-year ARM dropped to 17 basis points (or 0.17 percent), the narrowest spread since January 5, 2001.

A narrow spread reduces the benefit to a borrower for taking out an adjustable-rate mortgage over a fixed-rate mortgage. Interestingly, that spread was as wide as 297 basis points (nearly 3 percent) in 2003, when ARMs actually had a slightly smaller share of the market than they do currently.

SOURCE: MarketWatch