July 6, 2005

Mortgage applications increase last week -MBA

Adds data, details on adjustable-rate mortgages, 15-yearmortgages, background)

By Julie Haviv

NEW YORK (Reuters) - Applications for U.S. home mortgagesrose for the first time in three weeks despite higher loanrates, an industry group said on Wednesday.

The Mortgage Bankers Association said both refinancing andpurchasing activity rose sharply in the week ended July 1.

The MBA said its seasonally adjusted index of mortgageapplication activity increased 9.6 percent to 853.4, more thanoffsetting the previous week's 1.1 loss.

On a four-week moving average, the index is up 1.3 percentfrom 783.4 to 795.0.

The MBA's seasonally adjusted index of refinancingapplications climbed 10.2 percent to 2788.2, after falling 1.8percent the prior week.

The MBA's purchase index, a gauge of loan requests for homepurchases, rose 9.1 percent to 520.8, after dropping 0.4percent the previous week.

Fixed 30-year mortgage rates averaged 5.58 percent lastweek, excluding fees, up 11 basis points from 5.47 percent theprevious week.

Despite the rise, mortgage rates are still lower than wherethey stood a few months ago. The 30-year mortgage rate hit 6.08percent at the end of March, according to MBA figures.

Interest rates are also much lower than a year ago. Thefixed 30-year mortgage rate as of July 2, 2004 was 5.96percent.

The MBA also said the average contract interest rate for15-year fixed-rate mortgages rose 12 basis points last week to5.18 percent from 5.06 percent a week earlier.

Rates on one-year ARMs rose to 4.60 percent from 4.42percent the prior week.

Industry analysts and economists have said they expect homesales to edge off record 2004 levels as the Federal Reserveraises interest rates, but demand remains strong and has shownfew signs of waning.

Home prices in some areas of the United States have risenso high and so quickly that an increasing number of people arevoicing concerns over the possibility of a housing bubble.

Many analysts say housing prices will stop climbing whenmortgage rates hit levels that will deter buying. But for now,they remain at levels that still entice consumers.


Applications for adjustable-rate mortgages (ARMs) rose to30.7 percent of total applications from 30 percent, which wasits lowest level in over a year, the MBA said.

ARMs continue to be popular loan vehicles, The low initialpayments allow borrowers to buy homes that they would notnecessarily afford with a fixed-rate loan.

Refinancings also increased as a percentage of all mortgageapplications, at 45.7 percent of total applications, from 45.4percent the previous week.

Recent data on the U.S. housing sector showed that themarket is vigorous, with home building and sales remaining atrobust levels.

The MBA's survey covers approximately 50 percent of allU.S. retail residential mortgage originations. It has beenconducted weekly since 1990.

Respondents include mortgage bankers, commercial banks andthrifts.