Applications for U.S. home mortgages jumped to their highest in a month last week as concerns about economic recession pushed interest rates to their lowest in more than two years, an industry group said Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity rose 32.2 percent to 706 in the week ended Jan. 4, led by refinancings.
It was the highest level of activity since the first week of December, rising as the average 30-year fixed mortgage rate eased by 0.32 percentage point to 5.73 percent, MBA data showed.
The 30-year mortgage rate was the lowest since 5.72 percent in the week ended Sept. 9, 2005.
Fixed mortgage rates have declined as investors expecting slower economic growth piled into the safety of U.S. Treasury securities, sending yields lower. A weak U.S. employment report for December and increased concerns that weak housing will hit corporate earnings pushed benchmark 10-year Treasury yields on Tuesday to a six-week low of 3.8 percent.
The MBA's seasonally adjusted index measuring applications to refinance loans fueled the rise, soaring 53.9 percent to 2,494.2. The MBA's index of purchase applications increased 14.7 percent to 414.0.
Refinancings accounted for 57.7 percent of applications, up from 50.9 percent in the previous week, the MBA said.
While rising, the indexes likely overstate actual demand for mortgages since banks have tightened lending standards, which is forcing borrowers to make multiple applications, economists said. Tighter lending standards following the implosion of risky loans have forced borrowers to pay higher rates, or locked them out of the market, they said.