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NEW YORK: US mortgage applications leaped last week as rock-bottom interest rates lifted demand for home refinancing to its highest level in 15 months, a development that could portend stronger economic growth.
Home loan refinancing puts extra cash into consumers’ hands that can be used to pay off existing debt or funnel money into the economy through extra spending.
By lowering a monthly mortgage payment it may also help some homeowners avoid default and foreclosure if their credit is good enough.
The Mortgage Bankers Association (MBA) said on Wednesday its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended Aug 13, increased 13%. The four-week moving average of mortgage applications, which smooths the volatile weekly figures, was up 2.6%.
The MBA’s seasonally adjusted index of refinancing applications increased 17.1%, the biggest jump since the week ended May 15, 2009.
“Refinancing will help free up cash for homeowners that would have otherwise been tied into their home and this cash could help support consumer spending, and therefore GDP, albeit only modestly,” said Michelle Meyer, senior US economist at BofA Merrill Lynch in New York.
With investors worrying about deflation and a double-dip recession, the first revision to second-quarter GDP data, due Aug 27, will be closely watched. Bank of America Merrill Lynch forecasts a downward revision to 1.5%.
One sign that consumers may already be opening their wallets emerged on Wednesday when one of the largest US retailers, Target Corp, posted higher quarterly earnings.
The MBA said borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 4.6%, up 0.03 percentage point from the previous week’s record low. The survey has been conducted weekly since 1990. Mortgage rates were also below their year-ago level of 5.15%.
Fixed 15-year mortgage rates averaged 3.99%, up from the previous week’s record low of 3.95%. Rates on one-year adjustable-rate mortgage, or ARMs, decreased to 6.9% from 7%.
Home loan refinancing puts extra cash into consumers’ hands that can be used to pay off existing debt or funnel money into the economy through extra spending.
By lowering a monthly mortgage payment it may also help some homeowners avoid default and foreclosure if their credit is good enough.
The Mortgage Bankers Association (MBA) said on Wednesday its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended Aug 13, increased 13%. The four-week moving average of mortgage applications, which smooths the volatile weekly figures, was up 2.6%.
The MBA’s seasonally adjusted index of refinancing applications increased 17.1%, the biggest jump since the week ended May 15, 2009.
“Refinancing will help free up cash for homeowners that would have otherwise been tied into their home and this cash could help support consumer spending, and therefore GDP, albeit only modestly,” said Michelle Meyer, senior US economist at BofA Merrill Lynch in New York.
With investors worrying about deflation and a double-dip recession, the first revision to second-quarter GDP data, due Aug 27, will be closely watched. Bank of America Merrill Lynch forecasts a downward revision to 1.5%.
One sign that consumers may already be opening their wallets emerged on Wednesday when one of the largest US retailers, Target Corp, posted higher quarterly earnings.
The MBA said borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 4.6%, up 0.03 percentage point from the previous week’s record low. The survey has been conducted weekly since 1990. Mortgage rates were also below their year-ago level of 5.15%.
Fixed 15-year mortgage rates averaged 3.99%, up from the previous week’s record low of 3.95%. Rates on one-year adjustable-rate mortgage, or ARMs, decreased to 6.9% from 7%.
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