Mortgage applications rise 4.9 pct. on low rates

Borrowers rush to refinance on lowest rates in decades, loan applications rise by 4.9 percent

J.W. Elphinstone, AP Real Estate Writer,
On Wednesday August 25, 2010, 10:47 am EDT

NEW YORK (AP) -- Mortgage applications rose 4.9 percent last week as more borrowers refinanced at the lowest rates in decades.

The Mortgage Bankers Association said Wednesday the gain was fueled by a 5.7 percent increase in refinancing applications. The number of loans taken out to purchase homes edged up by less than 1 percent. The numbers are adjusted for seasonal factors.

Refinancing is at its highest level since May 2009 and makes up 82.4 percent of all new loan activity, its highest share since January 2009.

However, low mortgage rates have done little to boost home sales, which have been hurt by high unemployment, slow job growth and strict credit standards. Purchase activity is 41.5 percent below its level at the end of April, when two federal tax credits for homebuyers expired.

Rates have fallen since spring as investors sought the safety of Treasury bonds, lowering their yield. Mortgage rates tend to track those yields.

The average rate for a 30-year fixed loan fell to 4.55 percent from 4.6 percent a week earlier. Rates on the 15-year fixed-rate mortgage, a popular choice for refinancing, decreased to 3.91 percent from 3.99 percent.

The Mortgage Bankers Association's survey covers more than 50 percent of all applications nationwide.

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