Applications for mortgages at 3-month high

February 06, 2005|By BLOOMBERG NEWS

Mortgage applications in the week that ended Jan. 28 rose to the highest level since November as more people refinanced, a private group's survey found.

The Mortgage Bankers Association's gauge of applications increased 7.3 percent to 706.4, the highest since the week that ended Nov. 19, from the prior week's 658.1. The measure of refinancing jumped 16.6 percent to 2,253.9 from 1,932.8.

Refinancing has increased in three of the past four weeks, suggesting that homeowners are getting out of adjustable-rate mortgages and borrowing at fixed rates. Adjustable rates, unlike longer-term fixed mortgages, are higher now than before Federal Reserve policy-makers began raising their benchmark interest rate in June. The Fed boosted rates a quarter of a point for the sixth straight month Wednesday.

"That happens all the time," Alan Levan, chief executive officer of Levitt Corp., a Fort Lauderdale, Fla.-based homebuilder, said in an interview. "When people with ARMs face rising interest rates, they definitely begin to look to lock in a fixed-rate loan."

The bankers' index of applications to buy homes rose 0.3 percent to 440.3 from 439. The purchase and refinancing measures are below their averages for last year.

The survey, which covers about 50 percent of retail residential mortgage originations, has been conducted weekly since 1990. The base period is March 16, 1990, when the value for all indexes was 100.

Longer-term mortgage rates are expected to increase this year as Fed policy-makers raise their target rate to keep inflation from accelerating.

"Ultimately, if the Fed keeps pushing rates up, and we expect that they will, then long rates will start to follow," said James O'Sullivan, senior economist at UBS Securities. "In turn, housing has to slow."

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