Mortgage Activity Off Even as Rates Fall
Wed Apr 10, 8:58 AM ET
By Dan Wilchins
NEW YORK (Reuters) - U.S. mortgage refinancing activity fell last week to its lowest level since the summer, a trade group said on Wednesday, but activity is likely to pick up again this week because mortgage rates have edged down, economists said.
Mortgage refinancing has been and should continue to be a key part of the recovering economy, analysts said. The cash freed up by refinancings has helped consumers pay down other debt or fueled purchases, keeping an otherwise sluggish economy moving along, they noted. Consumer spending has been one of the mainstays in the economy.
Applications to refinance mortgages fell 4.6 percent last week, even as mortgage rates dipped. The 30-year mortgage rate fell 0.18 percentage points to 6.96 percent, while the 15-year rate fell 0.17 percentage points to 6.45 percent, according to the Mortgage Bankers Association of America.
Lower mortgage rates give more consumers an incentive to refinance mortgages, but there's a lag between when rates fall and when applications to refinance mortgages increase, said David Littmann, chief economist at Comerica Bank in Detroit. Rates have been trending upward for the last four weeks, which likely contributed to lower refinancing activity last week, he added.
The dip in rates is a positive sign, though. With gas prices rising, rising borrowing costs could have cut into consumer spending, which has been stalwart as the economy has stumbled, Littmann said.
"With these figures, there will be plenty of support for consumer spending," Littmann said.
The MBA's refinancing index last week fell 4.6 percent to 1,213.5 last week. That's in line with its historical average, but far below its record high level, 5,534.5, reached in the week ending Nov. 9.
PURCHASING STILL STRONG
Although refinancing activity has tailed off substantially since peaking in early November, purchasing activity has remained strong. The MBA's barometer of applications for mortgages on homes being purchased fell 4.9 percent last week to 332.8, but was still higher than its level two weeks before, and about equal to its average for the year.
"As long as interest rates do not rise sharply, it looks like the housing market will remain vibrant," said Jade Zelnik, chief economist at Greenwich Capital Markets.
The slowdown in purchase and refinancing activity last week contributed to a 4.8 percent decline in the MBA's barometer of overall mortgage market activity, bringing that index to 462.0, its lowest level since the week ending Dec. 28, when it stood at 439.2.
Each week, the MBA surveys between 20 and 35 firms, including the top lenders in the U.S. housing industry, to derive its refinance, purchase and market indices. This weekly survey accounts for more than 40 percent of all applications processed each week by mortgage lenders. |
