Mortgage application index rises

October 23, 2005|By BLOOMBERG NEWS

WASHINGTON -- Mortgage applications rose for the first time in a month, reflecting increases in home purchases and refinancing.

The Mortgage Bankers Association's index of applications in the week that ended Oct. 14 increased 6.1 percent to 737.5, from 694.8 the previous week.

The group's measure of home purchases rose for the first time in five weeks. The purchase index rose 7.3 percent to 503.9, suggesting an increase in mortgage rates hasn't been enough to stifle housing, economists said.

The average 30-year fixed mortgage rate increased to a 15-month high of 6.09 percent from 5.98 percent the previous week, the mortgage bankers data showed.

"Mortgage rates have moved up, but they're still not high enough to really pinch people," said Joel L. Naroff, president of Naroff Economic Advisers in Holland, Pa. "They'll have to increase at least another 50 basis points before they're high enough to stop a purchase."

The refinance index increased 4.5 percent to 2095.7 from 2004.9 in the previous week. Refinancing accounted for 42.8 percent of all mortgage applications, compared with 43.5 percent the prior week and 45.6 percent a year ago, suggesting home owners are switching to fixed-rate mortgages as Federal Reserve policymakers boost interest rates.

Adjustable-rate mortgages also claimed a smaller share in the week, falling to 29.3 percent of all mortgage applications from 29.5 percent.

The average 15-year fixed mortgage rate was unchanged at 5.62 percent. The average one-year adjustable mortgage rate increased to 5.34 percent, the highest since December 2001.

Douglas Duncan, chief economist at the mortgage bankers group, said he expects housing sales to slow in 2006 after setting a sixth consecutive annual record this year. The association forecast on Oct. 12 that 6.79 million homes will be sold in 2006, compared with an expected record of 7.04 million this year. The average rate on a 30-year fixed mortgage will be 6.6 percent next year, up from 5.8 percent in 2005, according to the group's forecast.

"These higher mortgage rates will slow the housing market down, but they're not enough to bring the boom to a halt," said W. Darryl Fry, chief executive officer of ComUnity Lending Inc. in Morgan Hill, Calif.

"They're going to suppress some refinancing activity, but cash-out refinances will continue to be popular with those who use the equity in their home as a bank account."

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