Mortgage Applications Rise in Latest Week

Applications for U.S. home loans rose last week, while the highest ARMs to date continue to take their toll on the once-torrid housing market.

The Mortgage Bankers Association’s mortgage loan applications index rose by a seasonally adjusted 1.3 percent in the week ending August 31.

Average 30-year home loan rates rose by 0.01 percentage point to 6.42 percent during the week, while 1-year adjustable rate mortgage (ARM) rates went up by the same amount to 6.52 percent.

These adjustable home mortgage loans had allowed many borrowers to acquire homes they might not otherwise be able to afford.

But now the squeeze is now on homeowners, with many being pushed to the brink of default.

The MBAA said that ARMs made up just 12.6 percent of total home mortgage applications last week, down from 15 percent the prior week. At their recent peak, more than 30 percent of new loans were ARMs.

In the week ended August 24, the industry group said the one-year ARM rate surged by nearly 0.70 percent, the largest weekly jump on record.

The last time the ARM share was as high as 30 percent was in early June 2006, when it reached a staggering 30.7 percent.

The MBA also said its seasonally adjusted home purchase loan index rose 0.4 percent in the latest week, while its mortgage refinancing applications gauge increased by 2.3 percent.

The home purchase loan and home mortgage loan refinancing gauges are subcomponents of the overall mortgage applications index.

It has become much more difficult for consumers to get home loans approved in past months as lenders have toughened criteria as late payments and loan foreclosures mount on mortgages issued when standards were looser.

Some sporadic increases in mortgage applications possibly reflects potential borrowers applying more than once, aiming to better their chances of getting approved.

SOURCE: Reuters