Loan applications show biggest rise in two months, report says

September 11, 2005|By BLOOMBERG NEWS

WASHINGTON - Mortgage applications increased by the most in more than two months as a drop in borrowing costs spurred home purchases and refinancing, a private report showed.

The Mortgage Bankers Association's index rose 6.8 percent to 771.6 in the week ending Sept. 2 from 722.5 the previous week. The rise was the biggest since the week ending July 1.

An improving job market and interest rates that have held below 6 percent since March are helping support housing demand, a mainstay of the economy, economists said.

"The momentum in the economy and job market, combined with mortgage rates that remain near generational lows, continues to provide a solid backdrop for housing," said Mike Englund, chief economist at Action Economics LLC in Boulder, Colo.

The index of purchase applications increased 6.1 percent to 499.1 from 470.6. The mortgage bankers group's gauge of applications to refinance existing mortgages rose 7.7 percent to 2357.1 from 2187.8.

Thirty-year fixed mortgage rates remain within a percentage point of the four-decade low 4.99 percent recorded in June 2003.

The prospect of slower economic growth after Hurricane Katrina may keep a lid on interest rates and support sales, said economists, including David Seiders of the National Association of Home Builders in Washington.

Home sales this year will probably reach another record, according to the National Association of Realtors.

The percentage of applications for adjustable-rate mortgages fell to 26.5 percent of mortgage activity the week ending Sept. 2 from 27.8 percent.

The Mortgage Bankers Association survey covers about half of all U.S. retail residential mortgage originations.

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