Requests for mortgage loan refinancings rose slightly last week as homeowners sought to take advantage of low rates, despite a minute rise in U.S. mortgage rates, a report said on Wednesday.
The Mortgage Bankers Association said its measure of demand for mortgage refinancings, the refinancing index, rose 0.1 percent to 4,988.7 in the week ended March 19. Refinancings accounted for over 60 percent of loans processed by lenders last week.
Average interest rates on 30-year mortgages rose 0.1 basis point to 5.28 percent in the March 19 week, but are down 43 basis points from a year ago.
The pace of lending, already lively, is expected to continue at a hectic pace in coming weeks, economists said.
"It is going to be maintained for the next couple of weeks. Two-thirds of the loans could be refis," said Frank Nothaft, chief economist at Freddie Mac on Tuesday before the report was released. "Any time you have mortgage rates at such a low level, there is a lot of incentive for families to come out and refinance their mortgage."
According to Nothaft, 30-year home loan rates last September were at about 6.25 percent. Now, with rates at 5-3/8 percent borrowers can save close to three-quarters of a percentage point in borrowing costs, the Freddie Mac economist said.
Refinancings help borrowers cut monthly mortgage costs and they can help home owners draw equity from their homes through cash-out refinancings.
Meanwhile, the MBA's market index, a measure of overall lending activity, fell 0.2 percent to 1,114.9 and the group's purchase index, a gauge of requests for loans to fund home purchases, fell by 0.8 percent to 448.9 from 452.4 in the prior week.
"Purchases are still incredibly strong," said Thomas Meyer, president of Homebuilders Financial Network, a firm which helps set up and operate mortgage finance companies for large home builders, on Tuesday before the report was released.
Meyer, whose firm has seen an increase in business of 10 percent to 13 percent year-to-date from 2003, said the desire for homeownership and low mortgage rates have created an ideal environment for the housing industry.
"At today's rates if you look at the rent-versus-buy scenario, owning may be more affordable than renting," Meyer said. Low downpayments and the promise of appreciation in value have kicked up a "feeding frenzy" for homes, he added.
