U.S. mortgage applications rose for a second consecutive week, an industry trade group said Wednesday, as consumers rushed to lock in loans as long-term interest rates rose to a near-four-year high.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity for the week ended March 31 rose 7.2 percent to 612.8 from the previous week’s 571.7.
“When rates make a sudden upward move, anybody that was on the fence about refinancing jumps off and gets in the game quick. But now we’re seeing that on the purchase side as refinancing activity continues to wane,” said Greg McBride, senior financial analyst at Bankrate Inc. in North Palm Beach, Florida.
Loan activity grew along with borrowing costs. Thirty-year fixed-rate mortgages, excluding fees, averaged 6.49 percent, up 0.13 percentage point from the prior week, a peak not reached since 6.53 percent in the the week ended June 14, 2002.
This type of loan rush is likely to be short-lived, analysts say.
“The market is going to slow from the frenetic pace of the past few years,” said McBride. “But with fixed mortgage rates remaining below 7 percent, and expected to (remain there) for the balance of 2006, the purchase market will still be very healthy relative to historical levels.”
Historically low mortgage rates have fueled a five-year housing boom, helping support the U.S. economy’s recovery from recession despite uneven business investment.
Analysts differ on whether or not there is a housing bubble, but most agree the market is cooling off from its record run.
The 30-year fixed-rate mortgage, the industry benchmark, last week was well above last year’s low of 5.47 percent, reached in late June, and topped 2005’s high of 6.33 percent in the week of Nov. 11.
The MBA’s seasonally adjusted purchase mortgage index -- considered a timely gauge of U.S. home sales --rose 8.4 percent to 438.2 from the previous week’s 404.1. The index was below its year-ago level of 446.0.
The group’s seasonally adjusted index of refinancing applications rose 5.3 percent to 1,640.8, its first gain in four weeks, compared with 1,558.4 the previous week. A year earlier, the index stood at 1,798.8.
The refinance share of mortgage activity decreased to 36.6 percent of total applications from 37.3 percent the previous week. It was the lowest refinance share since the week ended July 30, 2004, when it reached 35.8 percent.
Dallas Federal Reserve Bank President Richard Fisher said Tuesday that strong consumer and business spending should ensure the U.S. economy does not get derailed by a slowing housing sector.
“There is a slowdown apparently and there are factors that could or would contribute to relative weakness, relative to what we have recently seen, but we have a complicated economy,” Fisher told reporters after speaking at Midwestern State University.
Fixed 15-year mortgage rates averaged 6.15 percent, up from 6.00 percent the previous week. Rates on one-year adjustable-rate mortgages rose to 5.96 percent from 5.83 percent.
The ARM share of activity fell to 28.5 percent of total applications from 28.8 percent the previous week. ARM demand reached a 2005 high of 36.6 percent in late March of last year.
The MBA’s survey covers about 50 percent of all U.S. retail residential mortgage originations. Respondents include mortgage bankers, commercial banks and thrifts.