Mortgage Refinance, Home Purchase Loan Applications Up Again

Mortgage applications rose across the U.S. for the third straight week, driven by both home purchase loan and refinancing activity.

The Mortgage Bankers Association said its seasonally adjusted applications index increased 3.6 percent in the week ended May 4 to 680.7, its highest level since 690.5 in the week ended March 9.

Average 30-year fixed mortgage rates, not counting points, fell by 0.04 percent to 6.10 percent, their lowest since they hit 6.04 percent the week ending March 23.

Long-term borrowing costs have fallen about half a percent from a year ago, making this point in time a great opportunity for first-time buyers.

The MBA’s seasonally adjusted purchase index rose 2.6 percent to 438.3, its highest level since 439.7 in the week ended January 12.

The group’s seasonally adjusted mortgage refinancing index showed those applications up 4.9 percent to 2,115.2, also a peak since March 23.

Some economists contend that the typically close tie between mortgage application rates and home sales may have become disconnected.

Many home loan lenders have become more restrictive in offering mortgage loans as foreclosures have mounted due to widespread problems with subprime (bad credit mortgage loan) lending to borrowers with blemished credit.

So while applications may be on the rise, rejections may be as well.

“It remains to be seen if the tightening of lending standards and consumer fears of losing money on [home purchase loan] sales will fall short of the levels implied by the usual relationship with applications,” said Ian Shepherdson, economist at High Frequency Economics in Valhalla, N.Y.

The National Association of Realtors on Tuesday cut its home sales forecast for the third consecutive month, citing stricter lending practices and a drop in bad credit mortgage creation.

Existing home sales will total 6.29 million this year, down from 6.48 million last year and below the April estimate of 6.34 million.

Nationally, the median price of existing homes, which represent 85 percent of the housing market, will likely slide 1 percent in 2007 in the first drop in the Realtors nearly 40 years of record keeping.

SOURCE: Reuters