U.S. Mortgage Applications Increase for First Time in Six Weeks

The number of mortgage applications in the U.S. climbed for the first time in six weeks as record- low interest rates led to a surge in refinancing.
The Mortgage Bankers Association’s index increased 15 percent in the week ended Oct. 8, the Washington-based group said today. Refinancing rose 21 percent, the most in four months, while purchases decreased for the first time in three weeks.
“We had a huge pickup in volume in the last week when the rates touched an all-time new low,” Leif Thomsen, chief executive officer of Mortgage Master, a Walpole, Massachusetts- based lender, said before the report. “There’s a ton of refinancing going on, so, in simple math, we’re freeing up $3 billion to $4 billion a month for the American consumer who can go and spend.”
Record-low rates are making it possible for owners to lower monthly payments, freeing up cash they can use to spend on goods and services, boost savings or pay down debt. Home buying will take longer to rebound as unemployment hovers near a 26-year high and banks restrict credit, even as the lower borrowing costs make houses more affordable.
The mortgage bankers’ group’s purchase measure decreased 8.5 percent.
“The mortgage rates are just phenomenally low,” George Mokrzan, senior economist at Huntington National Bank in Columbus, Ohio, said in an interview. “That’s going to spur some consumers to finally take the plunge and certainly help some consumers get back into it.”
Record Low
The average rate on a 30-year fixed mortgage fell to 4.21, the lowest in records going back to 1990, percent from 4.25 percent, today’s report showed. At that rate, monthly payments for each $100,000 of a loan would be about $489.60, or $48.44 less than a year ago when the rate was 5.02 percent.
The average rate on a 15-year fixed loan fell to 3.62 percent, also the lowest on record, from 3.73 percent and the rate on a one-year adjustable decreased to 7.03 percent from 7.11 percent.
The share of applicants seeking to refinance a loan rose to 83.1 percent from 78.9 percent.
As interest rates and home prices fall, an overhang of foreclosed properties will slow the recovery in the housing market, according to Douglas Kass, who manages equity funds at Seabreeze Partners and was formerly a housing analyst at Kidder Peabody & Co.
“Housing is haunted by a large shadow inventory and certainly low interest rates have done little to improve that situation,” Kass said yesterday in an interview on “Bloomberg Surveillance” with Tom Keene.