(Corrects release time of new-home sales figures in 10th paragraph.)
Aug. 25 (Bloomberg) -- The number of mortgage applications in the U.S. increased for a fourth straight week, boosted by refinancing as borrowing costs reached record lows.
The Mortgage Bankers Association’s index rose 4.9 percent in the week ended Aug. 20, the Washington-based group said today. Refinancing climbed 5.7 percent to reach the highest level since May 1, 2009, while purchases gained 0.6 percent.
Lower rates, which are helping homeowners reduce their monthly payments, are doing little to stoke sales as the industry faces the headwinds of foreclosures and unemployment. New-home sales were probably little changed in July, Commerce Department data may show today, after an industry group reported yesterday a record 27 percent slump in purchases of previously owned houses.
“Record-low interest rates continue to draw refinancers,” Michael Bratus, an economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said before the report. “With the unemployment rate holding near 10 percent, we are not going to see any sizable increase in purchase applications.”
The average rate on a 30-year fixed mortgage fell to 4.55 percent, the lowest in MBA data going back to 1990, from 4.60 percent the prior week.
At the current rate, monthly payments for each $100,000 of a loan would be about $509.66, or $42 less than a year ago when the rate was 5.24 percent.
The average rate on a 15-year fixed loan fell to 3.91 percent from 3.99 percent, and the rate on a one-year adjustable declined to 6.84 percent from 6.90 percent.
The share of applicants seeking to refinance a loan rose to 82.4 percent, the highest since January 2009, from 81.4 percent the prior week, today’s report showed.
After the Credit
Housing sales have slumped as the effects of an $8,000 home purchase tax credit dissipated after the deadline to sign a contract expired in April. Existing-home sales plummeted in July to a 3.83 million annual rate, the lowest level since comparable records began in 1999, the National Association of Realtors reported yesterday.
New-home sales probably held at a 330,000 rate in July, economists surveyed by Bloomberg News forecast the Commerce Department will report today at 10 a.m.
“With the tax credit that expired in April, there was clearly a pull-forward effect,” Jeffrey Detwiler, president of Long & Foster Real Estate Inc., a Chantilly, Virginia-based brokerage company, said in an interview. “With consumer confidence as low as it is, not as many consumers are willing to commit to that sizable a transaction right now.”
Federal Reserve policy makers on Aug. 10 made their first attempt to shore up the recovery by pledging to keep their holdings of securities and prevent money from draining out of the banking system.
To help shore up the market, 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.
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