NEW YORK – U.S. mortgage applications rose for the first time in three weeks, reflecting a modest increase in home purchasing loan requests ahead of a widely expected Federal Reserve interest rate hike, an industry trade group said on Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity for the week ended March 24 increased 1.2 percent to 571.7 from the previous week's 565.0, which was its lowest level so far this year.
Douglas Duncan, chief economist at the MBA, attributed the slight uptick in demand to this week's Federal Reserve meeting on monetary policy.
"An increase in applications is typical ahead of a Fed meeting," he said. "People are aware that rates are going to rise, so they lock in ahead of time."
In the first meeting since Ben Bernanke took over as Fed chairman, the policy-setting Federal Open Market Committee raised its federal funds rate by a quarter-percentage point to 4.75 percent, as expected. It was the U.S. central bank's 15th straight hike of the benchmark borrowing rate since June 2004.
The MBA said on Wednesday that borrowing costs on 30-year fixed-rate mortgages, the industry benchmark, averaged 6.36 percent, excluding fees, up 0.05 percentage point from the previous week.
The 30-year fixed-rate mortgage was also substantially above its 2005 low of 5.47 percent in late June 2005 and above last year's high of 6.33 percent in the week of November 11.
PURCHASE MORTGAGE DEMAND UP
The MBA's seasonally adjusted purchase mortgage index rose 2.7 percent to 404.1 from the previous week's 393.6.
However, the index — widely considered a timely gauge of U.S. home sales — was below its year-ago level of 470.9.
The group's seasonally adjusted index of refinancing applications decreased 1.0 percent to 1,558.4 compared to 1,574.5 the previous week. A year earlier the index stood at 1,857.2.
Historically low mortgage rates have fueled a five-year housing boom, helping support the U.S. economy's recovery from recession despite uncertain business investment.
Most analysts contend that mortgage rates are on the rise. While they may differ on whether or not there is a housing bubble, most agree that the market is cooling off from its record run.
Fixed 15-year mortgage rates averaged 6.00 percent, up from 5.99 percent the previous week. Rates on one-year adjustable-rate mortgages (ARMs) increased to 5.83 percent from 5.68 percent.
The MBA's survey covers about 50 percent of all U.S. retail residential mortgage originations. Respondents include mortgage bankers, commercial banks and thrifts.
MIXED SALES SIGNALS
The MBA data is seen as an indicator of latest trends, following what were mixed signals on housing tendencies from other sources earlier this month.
Last Friday, the U.S. government reported that sales of new U.S. homes took their biggest plunge in February in nearly nine years, while prices fell and the number of homes for sale hit a high, signaling significant slowing in the housing market.
However, the day before, on Thursday, the National Association of Realtors said U.S. existing home sales rose 5.2 percent in February, defying forecasts of a slowdown as warm weather boosted single-family and condo sales.