Mortgage Requests Rise, Rates at New Lows

The number of applications Americans filed for mortgage loans last week rose slightly from the prior week as mortgage rates fell through their previous lows, according to an industry survey

June 18, 2003
By Richard Leong

NEW YORK (Reuters) - The number of applications Americans filed for mortgage loans last week rose slightly from the prior week as mortgage rates fell through their previous lows, according to an industry survey.  

The Mortgage Bankers Association of America said on Wednesday its seasonally adjusted gauge of overall mortgage requests rose to 1,701.7 for the week ended June 13, up 1 percent from the previous week's 1,684.6.

The robust housing market has been supporting a sluggish economy. Very low rates have fueled an unprecedented level of home sales and a refinancing boom that have enabled consumers to cut their debt burden and to free up cash for spending.

With little evidence of inflation and the economy revving up in the foreseeable future, Treasury yields, benchmarks for most U.S. mortgage rates, will hover about their 45 year lows, economists said.

"As long as bond yields stay at current levels, refinancing will remain at or even break above their record levels," said David Rosenberg, Merrill Lynch's chief North American economist. "The incentive to refinance is huge."

Economists estimated current rates make about 90 percent of all outstanding U.S. home loans refinanceable.

At the end of 2002, there were $6.4 trillion in outstanding mortgages on one-to-four family homes, according to the Bond Market Association.

Interest rates, excluding fees, on 30-year fixed-rate mortgages, the home loan type held by most Americans, fell to 4.99 percent, the lowest level since the group began its survey in 1990, down from prior week's record low of 5.06 percent. With rates likely to remain at rock-bottom for awhile, lenders and borrowers alike will stay with the current refinancing wave.

Bob Walters, vice president at Quicken Loans in Livonia, Michigan, estimated that his firm made up to $8 billion in mortgages in the first half of this year, doubling the amount issued during the same span in 2002.

"We have never seen them (loan originations) higher. They are at all-time highs for us," he said.

The Mortgage Bankers Association's index of demand for loans to refinance increased to 9,162.7, up 1.3 percent from the prior week's 9,046.9, but below the all-time high of 9,977.8 set for the week ended May 30.

The group's seasonally adjusted gauge for loan applications to buy a home stood at 419.1 against previous week's 418.9, an indication of healthy home sales.

On Monday, the National Association of Home Builders said its monthly sentiment index improved to 62 points, its highest level since February, from May's revised 57. A reading above 50 shows that more builders rated conditions for present and future home sales as good than poor.

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