U.S. mortgage applications rose for the first time in a month even as interest rates on 30-year home loans climbed to their highest levels of 2005, an industry trade group said Wednesday.
The Mortgage Bankers Association said its index of mortgage loan application volume for the week ended Oct. 14 increased 6.1 percent to 737.5, reversing course after falling for three consecutive weeks.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.09 percent last week, up 0.11 percentage point from the prior week and 0.01 percentage point higher than the previous 2005 peak reached in late March.
The 30-year fixed rate, the industry benchmark, has climbed on and off since late June’s level of 5.47 percent, its lowest in 2005. It also is substantially higher than the year-ago level of 5.64 percent.
The MBA’s purchase mortgage index, considered a timely gauge on U.S. home sales, rose 7.3 percent last week to 503.9, its first increase in five weeks. The refinancing applications index climbed 4.5 percent to 2,095.7.
The indexes were all seasonally adjusted, the MBA said.
Fixed 15-year mortgage rates last week averaged 5.62 percent last week, up from 5.55 percent the previous week. Rates on one-year adjustable-rate mortgages (ARMs) increased to 5.34 percent from 5.26 percent.
ARM activity falls
With ARMs, low initial payments have allowed borrowers to buy homes they may not have been able to afford with a fixed-rate loan.
But with the percentage difference between the average 30-year fixed-mortgage rate and one-year ARMs narrowing in recent weeks, demand for these floating rate loans has been waning.
The ARM share of activity decreased to 29.3 percent of total applications last week from 29.5 percent the previous week. ARM demand reached a 2005 high of 36.6 percent in late March.
Refinancings also decreased as a percentage of all mortgage applications, falling to 42.8 percent from 43.5 percent, the MBA said.
The MBA’s robust data come on the heels of other housing-friendly news.
U.S. home builder sentiment rose in October for the first time in four months, the National Association of Home Builders reported on Tuesday, returning to levels reached prior to Hurricanes Katrina and Rita.
Further insight into the strength of the housing market will emerge Wednesday morning when the Commerce Department releases data on housing starts in September.
The MBA’s survey covers about 50 percent of all U.S. retail residential mortgage originations. Respondents include mortgage bankers, commercial banks and thrifts.