Gauge of mortgage applications makes biggest gain in 2 months

October 24, 2004|By BLOOMBERG NEWS

An index of U.S. mortgage applications rose last week by the biggest percentage in two months as a drop in borrowing costs boosted home purchases and refinancing, a private group's survey found.

The 7.9 percent rise to 709.9 in the Mortgage Bankers Association's gauge of loan demand was the biggest since an 11.9 percent surge in mid-August. The purchase index rose 5.8 percent to 461.4, while the measure of applications to refinance existing mortgages increased 10.6 percent to 2155.2.

Low borrowing costs could help fuel home sales in coming months, bolstering the economy as builders meet demand, economists said.

"With mortgage rates below 6 percent, builders' backlogs near record-high levels and the prospect of imminent rebuilding activity in the Southeast, housing demand is likely to remain robust," said Stephen Stanley, chief economist at RBS Greenwich Capital Management in Greenwich, Conn.

The housing market has been "steady and solid," said Ara Hovnanian, chief executive of Red Bank, N.J.-based homebuilder Hovnanian Enterprises Inc. The average price is likely to keep rising, he said, but not at the pace of the past few years.

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