Reuters
Mortgage Refinancings Rise on Rate Drop
Wednesday September 10, 8:48 am ET
By Richard Leong
NEW YORK (Reuters) - A drop in interest rates sparked a rebound in mortgage refinancing requests after nine weeks of declines and boosted the overall number of applications Americans filed for mortgages last week, according to an industry survey.
The Mortgage Bankers Association of America said on Wednesday its seasonally adjusted gauge of overall mortgage requests rose to 771.8 for the week ended Sept. 5, up 22.8 percent from the previous week's.
The reading is the highest in four weeks but still well below the record high of 1,856.7 in the last week of May.
"With mortgage rates decreasing for the first time in over two months, consumers are taking advantage of a dip in interest rates," said Douglas Duncan, the group's chief economist.
It is unclear whether last week's rise in refinancing applications to their highest level in a month was a trend reversal or the last gasp of the unprecedented boom.
"We are on the downside of the refinancing wave," Duncan said. "Consumers are looking at fewer opportunities."
Worries over rising rates and the fallout on housing and refinancing jolted the stock market on Tuesday.
Wall Street investment bank Goldman Sachs warned of weaker consumer spending that could hurt retailers like Home Depot Inc. (NYSE:HD - News) and Federated Department Stores (NYSE:FD - News) in the belief the housing turnover is peaking and may decelerate later this year.
Chief executives at Washington Mutual Inc. (NYSE:WM - News) and Countrywide Financial Corp. (NYSE:CFC - News), the No. 2 and No. 3 U.S. mortgage lenders, said at a financial conference in New York on Tuesday that their companies saw double-digit declines in mortgage applications in August versus July.
Economists and the Federal Reserve have acknowledged the key role of refinancing in supporting the economy when it turned sour three years ago. Refinancing, spurred by low interest rates, freed up billions of dollars in cash for consumers to spend.
REFINANCING REBOUNDS
Demand for refinancing has fallen sharply in recent weeks prompted by the upward spike in mortgage rates. But rates slid on Friday along with Treasury yields following a poor U.S. payrolls report that showed a surprise decline in jobs in August, crimping optimism the job market would finally recover.
Friday's drop in Treasury yields pushed average 30-year mortgage rates below 6 percent for the first time since mid-July.
Interest rates, excluding fees, on 30-year fixed-rate mortgages, the home loan held by most U.S. homeowners, averaged 5.99 percent, down from the prior week's 6.25 percent.
"The consumers who missed the (rate) bottom said, 'We better move now,"' the association's Duncan said.
The group's seasonally adjusted gauge for loan applications to refinance increased to 2,883.6, up 45.5 percent from the previous week but 71 percent below the all-time peak of 9,977.8 set in the week ending May 30.
The group's index of demand for loans for home purchases rose to 408.8, up 3.2 percent. Demand for loans to buy homes has dropped only slightly in recent months, supported by strong home sales. |
