A record number of Americans filed applications for mortgages to buy homes last week, an industry trade group said Wednesday, as borrowing rates fell within sight of the four-and-a-half decade lows reached in June.
The Mortgage Bankers Association said that its purchase index rose 12.5 percent to 501.6, the highest level since the group began its weekly survey in 1990, after the 30-year mortgage rate fell to 5.55 percent, the lowest since July. The 30-year rate bottomed out at 4.99 percent in June, when by other surveys with a longer history, mortgage rates reached their lowest levels in 45 years.
"Housing is not just strong, it's out of this world," said David Littmann, chief economist at Comerica Bank in Detroit.
The mortgage and housing sectors have been crucial props to the economy for two years, as low borrowing rates have encouraged refinancing and home purchasing.
Strong demand for home loans spurred record business volume for mortgage finance giant Fannie Mae last year, the company said on Wednesday.
Many economists had expected home sales to slow at the beginning of this year, but recent declines in mortgage rates have given new life to the housing boom.
Last month, U.S. builders broke ground on new homes at the quickest pace since February 1984, the Commerce Department said on Wednesday.
Demand for home loans has remained strong because rates are still low, economists said. With recent reports suggesting the labor market is weaker than expected, investors have been ploughing more money into longer-term bonds, which eventually leads to reduced borrowing rates for consumers.
Last week, lower mortgage rates led to a 51.5 percent jump in refinancing applications, bringing the Mortgage Bankers Association's refinancing index to 3,327.3, its highest level since the week ended Aug. 1.
The surge in refinancing applications last week was the biggest, in percentage terms, since Jan. 12, 2001.
Rising refinancing and purchase applications lifted the industry group's index of overall mortgage market activity, its market index, by 30.4 percent to 916.1, the highest level since the week ended Aug. 1.