Mortgage Applications Rise Due to Refinancing Activity

Home loan applications rose slightly over the past week, as a jump in mortgage refinancing demand overshadowed a drop in demand for traditional home loans to buy houses.

The Mortgage Bankers Association’s home loan application index climbed 0.9 percent to a seasonally adjusted 631.6 in the week ended July 13.

The mortgage refinancing applications index rose 4.9 percent to 1,717.4, more than offsetting a 1.6 percent drop in the purchase index to 446.5.

Borrowing costs on 30-year fixed-rate home mortgages, excluding fees, came in at 6.65 percent a week ago, and dropped 0.04 percent to 6.61 percent.

Long-term mortgage rates, since early June, have been hovering at higher rates than anything seen since last summer.

Rising mortgage loan costs are crimping affordability at a time when home loan lender standards are tightening and are making it more difficult for buyers to get loans approved.

On a four-week moving average, which smooths out the near-term volatility of weekly rankings, all three of the MBA’s indexes dropped by less than 1 percent.

Mounting late payments and foreclosures, softening sales and falling prices have yet to take the beleaguered housing market to a new low.

Nationally, U.S. home builder sentiment this month sank to its lowest level in about 16-1/2 years, the National Association of Home Builders said.

Builders are still grappling with huge stockpiles of unsold homes, even after months of slicing prices and throwing in incentives to buyers.

Later on Wednesday, the Commerce Department will report further erosion in housing starts and permits to build homes, based on surveys of economists.

New construction likely dropped in the month of June because of the already unwieldy supply of unsold homes and tighter mortgage lending standards that further squeezed affordability and access to credit, economists said.

SOURCE: Reuters