An index of mortgage applications in the U.S. rose last week to the highest level since October as more Americans took advantage of lower interest rates and refinanced.
The Mortgage Bankers Association’s index increased 6.7 percent in the week ended July 2. The Washington-based group’s refinancing gauge jumped 9.2 percent to the highest reading since May 2009, and its index of purchases fell 2 percent to the second-lowest level since 1997.
Near record-low mortgage costs may encourage more homeowners to refinance loans to trim their monthly payments. Home sales are showing few signs of rebounding after the end of a tax credit of as much as $8,000, indicating employment gains and a reduction in foreclosures are needed to sustain the housing recovery.
“Housing is looking exceedingly weak,” Michael Gregory, a senior economist at BMO Capital Markets in Toronto, said before the report. “We need job growth and income growth for demand to pick up.”
The share of applicants seeking to refinance a loan rose to 78.7 percent last week, the highest since April 2009, from 76.8 percent the prior week.
The average rate on a 30-year fixed loan was little changed at 4.68 percent, holding just above the record low of 4.61 percent reached in March 2009 after the Federal Reserve expanded a mortgage-purchasing plan aimed at reducing lending rates. The program ended in March of this year.
At the current 30-year rate, monthly payments for each $100,000 of a loan would be about $517, down about $40 from a year ago when the rate was 5.34 percent.
The average rate on a 15-year fixed mortgage rose to 4.11 percent from 4.06 percent, and the rate on a one-year adjustable mortgage increased to 7.2 percent, from 7.05 percent.
The tax credit for first-time homebuyers, which was extended in November to include some current owners, required contracts be signed by April 30 and closed by June 30. President Barack Obama last week signed another extension, under which buyers have until Sept. 30 to complete paperwork and settle on the house.
The number of contracts to purchase previously owned homes plunged in May by more than twice as much as forecast, according to figures from the National Association of Realtors. Housing starts and building permits also declined in May.
Improvement in the labor market may be needed before home sales recover. Payrolls fell in June for the first time this year, reflecting a drop in federal census staff and a smaller- than-forecast gain in private hiring, government figures showed on July 2. The jobless rate fell to 9.5 percent from 9.7 percent as the labor force shrank.
Covington, Louisiana-based Pool Corp., the world’s largest wholesale distributor of swimming-pool products, said it is focusing on the upkeep of older pools as the industry adapts to plunging home sales and declining pool construction.
“We had to adjust to what the retail customer wanted,” Chief Executive Officer Manuel Perez de la Mesa said in an interview on June 30. “We had to come up with new products and new marketing programs.”