Mortgage Applications in U.S. Increase From 12-Month Low on Refinancing, by Bob Willis, Bloomberg.com


Mortgage applications in the U.S. rose last week from a 12-month low as refinancing increased for the first time since early November.

The Mortgage Bankers Association’s index of loan applications increased 2.3 percent after dropping 3.9 percent in the prior week to the lowest level since December 2009. The group’s refinancing gauge rose from the lowest level since Jan. 1, while the purchase index declined.

Home-purchase applications fell 31 percent at the end of the year from a 2010 high in April, while an increase in mortgage rates hampers refinancing. Declining home prices, mounting foreclosures and unemployment hovering near 10 percent mean any recovery in housing, the industry that triggered the recession, will probably take years.

“It doesn’t look good,” Brian Bethune, chief financial economist at IHS Global Insight in Lexington, Massachusetts, said before the report. “With rates moving up, it’s going to be a tough hurdle.” On purchases, “we’re still in this sideways, choppy situation.”

The group’s refinancing gauge rose 3.9 percent after dropping 7.2 percent. The purchase index fell 0.8 percent last week after rising 3.1 percent.

The average rate on a 30-year fixed loan dropped to 4.82 percent last week from 4.93 percent the prior week, which was the highest since May, the group said. The rate reached 4.21 percent in October, the lowest since the group’s records began in 1990.

Borrowing Costs

At the current 30-year rate, monthly borrowing costs for each $100,000 of a loan would be $525.87, or about $22 less than the same week the prior year.

The share of applicants seeking to refinance a loan rose to 71 percent last week from 70.3 percent the prior week.

Hovnanian Enterprises Inc., the largest homebuilder in New Jersey, on Dec. 22 reported a fourth-quarter loss bigger than analysts expected as revenue fell 19 percent.

“The year can generally be described as one where we and the industry were bouncing along the bottom,” Chief Executive Officer Ara Hovnanian said on a conference call.

The Washington-based Mortgage Bankers Association’s loan survey, compiled every week, covers about half of all U.S. retail residential mortgage originations.

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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