Related News:
Mortgage Applications in U.S. Rise for a Fifth Week Amid Record-Low Rates
The number of mortgage applications in the U.S. increased for a fifth consecutive week as record-low borrowing costs lifted refinancing.
The Mortgage Bankers Association’s index rose 2.7 percent in the week ended Aug. 27, the Washington-based group said today. Refinancing climbed 2.8 percent to the highest level since May 2009, while purchases gained 1.8 percent.
The plunge in mortgage costs, which is prompting Americans to refinance loans to cut monthly payments, has failed to prevent a slide in demand following the end of a tax credit of as much as $8,000. A sustained housing recovery may take years to develop given the lack of jobs and mounting foreclosures.
“Lower long-term interest rates have led to a new surge in mortgage refinancing,” Paul Ashworth, senior U.S. economist at Capital Economics Ltd. in Toronto, said before the report. Data on sales and starts indicate “the housing market is in freefall again.”
The average rate on a 30-year fixed mortgage fell to 4.43 percent, the lowest in data going back to 1990, from 4.55 percent the prior week.
At the current rate, monthly payments for each $100,000 of a loan would be about $503, or $42 less than a year ago when the rate was 5.14 percent.
The average rate on a 15-year fixed loan fell to 3.88 percent from 3.91 percent, even as the rate on a one-year adjustable climbed to 6.95 percent from 6.84 percent.
More Refinancing
The share of applicants seeking to refinance a loan rose to 82.9 percent, the highest since January 2009, from 82.4 percent the prior week, today’s report showed.
The homebuyers tax credit required purchasers sign a contract by April 30 and close transactions by June 30. While the deadline for completion was moved to Sept. 30, there was a rush to close ahead of the initial expiration date, and house purchases are slumping.
Sales of new homes fell 12 percent in July to the lowest level since records began in 1963, data from the Commerce Department showed. Sales of existing homes plunged 27 percent to the slowest annual pace in records dating to 1999, the National Association of Realtors reported.
A report yesterday showed the S&P/Case-Shiller index of property values in 20 U.S. cities rose more than forecast in June from a year earlier, reflecting the influence of the tax incentive. Even so, the pullback in demand since its expiration may weigh on prices in coming months.
Administration’s Plans
The Obama administration plans to offer $1 billion in zero- interest loans to help homeowners who’ve lost income avoid foreclosure as part of $3 billion in additional aid targeting economically distressed areas.
Minutes of the Federal Reserve’s Aug. 10 meeting, released yesterday, showed while policy makers recognized that housing likely “had bottomed out,” large inventories of vacant and unsold homes and continuing foreclosures would increase the number of houses for sale and damp construction. That indicated “a sustained upturn from very low levels was not imminent,” they said.
To contact the reporters on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net
Rate These Stories
Rate this Page