U.S. mortgage demand climbs in Sept 5 week-MBA

U.S. mortgage demand climbs in Sept 5 week-MBA
Wednesday September 10, 7:02 am ET

UPDATE - U.S. mortgage refinancings rise on rate drop
Wednesday September 10, 8:43 am ET
By Richard Leong

(Recasts, adds quotes from Mortgage Bankers Association)NEW YORK, Sept 10 (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.

Lower Mtge Rates Gives Last Gasp Of Air For Refinancing

.
By Julie Haviv
Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)-Just when the final nail was about to be put in the mortgage refinancing coffin, a last gasp of air emerged this week as homeowners scrambled to take advantage of lower interest rates.

After declining an astonishing 80% from its all-time high set in late May, the Mortgage Bankers Association's refinance index bounced off its bottom this week, increasing 45.5% to 2,884. This week's increase in the index followed nine consecutive weeks of declines.

The uptick, however, is described by people in the mortgage-backed securities market as a temporary reaction to a decline in mortgage rates, not a trend.

"The most recent refi number is a blip and was mostly people who missed the refinancing boat several months ago," said Art Frank, director of MBS research at Nomura Securities International in New York. "It is still not a very high level and below what we think is a refi wave."

It's also possible that the latest trend upward in refinancing reflected the return of many borrowers from their vacations, who - tanned and rested - were ready to take advantage of lower interest rates, economists said.

The average 30-year fixed rate mortgage fell back to 5.99% during the week the index was taken, down 26 basis points from the prior week.

Nevertheless, mortgage rates are quite a bit higher than where they were in early June when Freddie Mac announced an all-time record low of 5.21% in the 30-year fixed-rate mortgage.

In its latest weekly survey, Freddie Mac said the 30-year fixed-rate mortgage stood at an average of 6.44%. That was highest registered since the week ended July 19, 2002.

"I wouldn't change my bigger picture idea that we are on a refinancing downtrend and we are likely to trend lower, particularly as long as rates are rising," said Stephen Stanley, senior market economist at RBS Greenwich Capital Markets.

Stanley said that except for the last few years, a "normal" level for the MBA's refinancing index was below 1,000.

"It could easily drop below 1,000 over the next several months, unless rates were to fall again. But there is not much of a chance that rates will get back to where they were at their lows in June," he said.

Still, there may be one last hurrah for refinancing activity.

"Given that rates have remained fairly low this week, refinancing should do well in next week's data," said Anthony Karydakis, senior economist at Banc One Capital Markets. "But we do not expect any sustained rise in the foreseeable future unless the bond market rally extends appreciably further."

-By Julie Haviv, Dow Jones Newswires; 201-938-2071;
julie.haviv@dowjones.com

(END) Dow Jones Newswires

09-10-03 1344ET- - 01 44 PM EDT 09-10-03

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