Home Purchase Mortgage Applications Edge Up

By:: Peter King | September 29, 2010

Mortgage rates continued to fall to new lows last week, accompanied by a small increase in the number of people seeking to buy a home.

Average interest rates on 30- and 15-year home loans reached new record lows, according to the Mortgage Bankers Association weekly rate survey. The average rate on 30-year fixed-rate mortgages fell to 4.38 percent last week, down from 4.44 percent previously, while the average 15-year rate fell to 3.77 percent, down from 3.88 percent. Both are the lowest reported in the 20-year history of the MBA survey.

The decline was accompanied by a boost in applications for mortgages to purchase homes, which increased a seasonally adjusted 4.5 percent over the week before. Given the lead time involved in making a home purchase, purchase applications generally do not respond to fluctuations in mortgage rates, although sustained low rates tend to stimulate purchase activity.

Homebuying activity has been slowly rising after a steep plunge following the end of the federal homebuyer tax credit program, with purchase applications increasing an average 1.1 percent a week over the past month.

Meanwhile, interest in refinancing current mortgages appears to be largely tapped out, with refinance applications declining for the fourth consecutive week despite falling interest rates. Unlike home purchases, mortgage refinancing tends to be sensitive to swings in interest rates as homeowners seek to take advantage of favorable conditions.

Applications to refinance existing mortgages were down a seasonally adjusted 1.6 percent last week, and are down an average 4.2 percent over the past week. Even so, refinancing still makes up the vast majority of mortgage activity, making up approximately four out of five mortgage applications.

It’s not clear how many of those applications are actually approved for new mortgages, however, as the MBA only reports figures for applications. The survey covers about 50 percent of all U.S. residential mortgage applications and is based on an 80 percent loan-to-value ratio.

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