Mortgage application index rises

Rates dropping to lowest in more than a decade lead to more refinancing

January 05, 2003|By BLOOMBERG NEWS

An index of applications for U.S. mortgages rose last week as mortgage rates dropped to the lowest in more than a decade of recordkeeping and spurred refinancing, according to an industry report.

The Mortgage Bankers Association of America's mortgage applications index increased 4.7 percent to 950.9, the second increase in the past three weeks, from 908.3 in the previous week. That compares with the previous year's average of 796.7. The index was released last week.

The refinancing applications index increased 10.9 percent to 4,548.8, the highest in five weeks, from 4,101.

It also remains above the average of 3,365 for 2001. The money taken out during refinancing is helping boost the economy even as consumer confidence wanes and with unemployment at 6 percent, an eight-year high. Refinancing gives homeowners the wherewithal to spend.

The economic recovery is "depending on resilient consumers," said Tim Rogers, chief economist at Briefing.com in Boston.

Because of growth of disposable incomes and money from refinancing "you are seeing a number of elements supporting consumer spending despite the fears about confidence," he said.

Confidence fell last month for the sixth time in seven months, the Conference Board, a New York-based research group, said Tuesday.

Lower mortgage rates are encouraging more refinancing. The average rate on a 30-year fixed mortgage fell to 5.85 percent, according to Freddie Mac.

While refinancing is holding up, homebuying may have peaked. The bankers' purchase index, a gauge of housing demand, fell 7.5 percent to 332.4, the lowest since the week that ended March 22, from 359.4.

The mortgage bankers' survey measures applications against a base level of 100 set in the week that ended March 16, 1990. The survey covers 40 percent of the U.S. residential mortgage market.

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