Mortgage Applications Surge, Rates Drop

Applications for U.S. home mortgages soared last week as fixed mortgage rates dropped below the key 5 percent level, as demand for refinancings surged, an industry group reported on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity jumped 45.7 percent to 875.3 in the week ended Feb. 13.

It was the highest reading since Jan. 16, and coincided with a 0.2 percentage point drop in average 30-year mortgage rates over the past week to 4.99 percent, the MBA said in a statement.

The increase was mostly due to refinancings of mortgages, with the MBA's index of such loans climbing 64.3 percent to 4,472.9.

The gauge of loan requests for home purchases rose 9.1 percent to 257.3, the MBA said.

Mortgage rates have tracked a decline in U.S. Treasury note yields on rising concern that the global banking system is in tatters, despite promises of government rescue plans.

Big drops in stock indexes sent investors to the relative safety of U.S. government debt in a move that extended through Tuesday.

The Federal Reserve has also concentrated buying in a $500 billion mortgage security purchase program in bonds supported by new loans, allowing lenders to lower consumer rates.

A drop in mortgage rates to a record low 4.89 percent in early January pushed the MBA's applications index to 1,324.8, the highest reading since July 2003.

The 30-year mortgage rate rose as high as 5.28 percent in late January as concerns about increased Treasury debt boosted U.S. borrowing costs.

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