Feb. 6 (Bloomberg) -- Mortgage applications in the U.S. increased for a fifth consecutive week, led by a rebound in purchases.

The Mortgage Bankers Association's index of applications to buy a home or refinance a loan rose 3 percent last week to 1086.6, the highest since March 2004. The group's purchase index jumped 12 percent and the refinancing gauge fell from a four- year high.

The collapse in the subprime market and tougher lending rules may be prompting borrowers to file multiple applications to ensure financing, economists said. Still, the decline in mortgage borrowing costs as the Federal Reserve has lowered rates may be making homes more affordable for some buyers.

``With tighter lending standards, many applications may be rejected,'' Sam Coffin, an economist at UBS Securities LLC in Stanford, Connecticut, said in a note to clients. ``Still, the pattern suggests some stimulus from recent declines in interest rates.''

The mortgage bankers' purchase index rose for the first time in three weeks, reaching 405.3. The refinancing gauge fell 1 percent, the first decline in more than a month, to 5054.

The bankers' survey only includes retail lenders, which have probably seen an increase in business as many wholesale brokers closed their doors following the subprime crisis, some economists say.

More banks made it tougher for households to get loans in the past three months, particularly in real estate, while a majority said mortgage demand weakened, according to the results of a Federal Reserve survey released this week.

Less Lending

About 55 percent of U.S. banks toughened terms for prime mortgages, up from 40 percent in October, while 85 percent of respondents made it tougher to get nontraditional loans, up from 60 percent, the survey said.

Beazer Homes USA Inc., the homebuilder under investigation by the U.S. Securities and Exchange Commission, said Feb. 1 it plans to exit the mortgage business and stop selling homes in four markets in the South and Midwest.

The Atlanta-based company said it will discontinue mortgage origination services through Beazer Mortgage Corp., and has ended its mortgage services relationship with Homebuilders Financial Network LLC.

Investors are betting the Fed will cut its benchmark lending rate by an additional half point to 2.5 percent at, or before, its next meeting on March 18. The Fed lowered the rate twice in as many weeks last month.

Refinancing Slows

Today's report showed the share of applications to refinance loans fell to 69.2 percent from 73.5 percent the prior week, when it reached its highest since June 2003.

The average rate on a 30-year fixed loan rose to 5.61 percent from 5.60 percent the prior week. At the end of 2007, the rate stood at 6.05 percent.

At the current rate, monthly borrowing costs for each $100,000 of a loan would be $574.71, or about $81 less than in June 2006, when it reached a four-year high of 6.86 percent.

The average rate on a 15-year fixed mortgage increased to 5.09 percent from 5.04 percent. The rate on a one-year adjustable mortgage fell to 5.62 percent.

The Washington-based Mortgage Bankers Association's loan survey, compiled every week since 1990, covers about half of all U.S. retail residential mortgage originations.

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

Last Updated: February 6, 2008 07:00 EST