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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (8868)	7/8/2004 9:50:47 AM
From: Pogeu Mahone	Respond to of 116555

Mortgage demand up 19.5% in a week Rates below 6% for 1st time since April By Chris Reidy, Globe Staff \| July 8, 2004 US mortgage applications last week had their biggest seven-day surge in more than three months, driven by rates that fell below 6 percent for the first time since April. ''People have definitely been responding" to the down-tick in borrowing costs, said Denise Leonard, senior vice president of Constitution Financial Group in Saugus, a mortgage specialist. For the week ended July 2, the Mortgage Bankers Association's overall index of applications rose 19.5 percent from the previous week, the biggest percentage gain since mid-March. Its index of mortgage applications tied to a home purchase rose 15 percent. The index that gauges mortgage refinancing was up 27.6 percent -- the first increase in three weeks and the biggest gain since mid-March. Consumers have been buying homes at a steady pace all year, but there had been a lull in refinancing, according to one industry index. ''We're seeing a lot of people buying a second home," said John Brodrick, president of First Service Home Mortgage, a mortgage broker and lender in Westwood. ''They're saying, 'Grab it now because rates are eventually going to go up.' " Nationwide, the average rate last week for 30-year fixed-rate mortgages fell to 5.96 percent from 6.21 percent the previous week, the Mortgage Bankers Association reported yesterday. That's good news for house hunters and homeowners looking to refinance, said John Bitner, chief economist for Eastern Investment Advisors, a unit of Eastern Bank in Boston. ''We're still within 1 percent of the lowest mortgage rates that people have seen in their lifetime," he said. The dip in mortgage rates is fallout from a disappointing jobs report issued last week. Mortgage rates move in step with yields of US Treasury notes, which fell after the jobs data were released. The other big news last week was the decision by the Federal Reserve to increase a key short-term interest rate for the first time in more than four years. The Fed's indication that it plans to raise interest rates slowly, however, means it's likely that mortgage rates will rise slowly as well. ''Gradually, mortgage rates will ratchet up," Bitner said. ''A year to a year-and-a-half from now, we could be looking at 7 percent." Just over a year ago, the weekly average on a 30-year fixed-rate mortgage was at a record low of 5.21 percent, as measured by Freddie Mac, a purchaser of mortgages. Rates at or near that level touched off a refinancing boom. After all the refinancing activity of 2002 and the first half of 2003, there would seem to be few homeowners left who have not refinanced. But that isn't the case, mortgage brokers said. Consumers with adjustable-rate mortgages might want to lock into a fixed rate, and those with low- or no-down payment mortgages, which often come with higher rates, could find a lower rate, brokers said. ''In general, people who are refinancing are looking for a fixed rate," Leonard said. Brodrick said about 30 percent of his customers who are buying a home choose an adjustable-rate mortgage. Material from Globe wire services was used in this report. Chris Reidy can be reached at reidy@globe.com. © Copyright 2004 The New York Times Company