U.S. mortgage applications climbed for the third straight week in January, fueled by a decline in long-term rates to 3-1/2 month lows, an industry trade group said on Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity for the week ended Jan. 20 rose 7.7 percent to 660.5, boosted by renewed demand for home purchase loans and strong refinancing volume.
The group’s seasonally adjusted index of refinancing applications increased 7.8 percent to 1,773.9 — its fourth consecutive weekly rise.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.04 percent, down 0.03 percentage point from the previous week’s 6.07 percent, marking its seventh consecutive weekly decline. Rates were at their lowest level since the week ended Oct. 7, when it reached 5.98 percent.
The rates on the 30-year mortgage, the industry benchmark, have been on a downward trend since the week ending Nov. 11, when they reached a 2005 high of 6.33 percent.
The MBA’s seasonally adjusted purchase mortgage index rose 6.7 percent to 473.7, erasing a 3 percent slide in the prior week. The index is considered a timely gauge on U.S. home sales.
Fixed 15-year mortgage rates averaged 5.66 percent, up from 5.64 percent the previous week. Rates on one-year adjustable-rate mortgages (ARMs) increased to 5.44 percent from 5.39 percent.
Analysts say an increasing number of borrowers are converting their ARMs into new fixed-rate loans as the difference between adjustable and fixed mortgage interest rates narrow. They say this has been a factor in refinancing demand.
Despite the recent trend, rates on mortgage loans are expected to move higher this year, which is one of the reasons why loan volume has surged over the past few weeks, analysts say.
The MBA’s survey covers about 50 percent of all U.S. retail residential mortgage originations. Respondents include mortgage bankers, commercial banks and thrifts.
