Mortgage Applications Rise as Home Loan Rates Dip

Applications for U.S. residential mortgages climbed last week from the lowest level in a month as home loan rates declined, according to data published by an industry group on Wednesday.

Lending conditions remained tight with global financial markets in chaos, crimping mortgage activity, analysts said.

David J. Phillip

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity rose 2.2 percent in the week ending Oct. 3 to 465.5 after falling 23 percent the prior week to the lowest level since the end of August.

Mortgage rates declined last week.

As investors rushed to the safety of U.S. Treasury securities, yields fell on the debt, which is used as a peg for home loan rates.

Fixed 30-year mortgage rates averaged 5.99 percent, down from 6.07 percent the prior week.

The MBA's seasonally adjusted index of applications for loan refinancings rose 0.9 percent last week to 1,345.8 after tumbling 34.7 percent a week earlier.

The gauge of loan requests for home purchases climbed 3.2 percent to 314.5 after dropping by 10.9 percent.

Major U.S. stock indexes tumbled even after a $700 billion U.S. government rescue program was enacted on Friday and the Federal Reserve this week unveiled new steps to improve financial system liquidity.

The programs are intended to boost confidence and the willingness of financial institutions to lend.

Unemployment is at a five-year high and expected to keep rising, meantime, which could dampen demand for home purchases, analysts said.

Copyright 2008 Reuters. Click for restrictions.