U.S. mortgage applications rose last week, with both new purchases and refinancings driven up by the lowest long-term home loan rates since early December, an industry trade group said Wednesday.
The Mortgage Bankers Association said its seasonally adjusted mortgage application activity index rose 2.8% in the week ended March 9 to 690.5, the highest reading since 721.2 in the week ended Dec. 8.
A year ago, this measure stood at 574.4 and 30-year loan rates were at 6.42%.
Fixed 30-year mortgage rates excluding fees dipped 0.01 percentage point last week to average 6.03%, the lowest since 5.98% in the week ended Dec. 1, according to the MBA.
The MBA's seasonally adjusted purchase index, viewed as a timely gauge of U.S. home sales, gained 2.2% to 414.3. The industry group's seasonally adjusted refinancing applications index climbed 3.5 percent to 2,312.2 in the March 9 week.
On a four-week moving average, which smooths volatility, the market index rose 2% to 648.7, the purchase index gained 0.9% to 400.6 and the refinance index increased 3.4% to 2102.8.
The MBA on Tuesday pushed back its prediction for a turnaround in U.S. housing, saying housing would regain its footing near the end of the year instead of its December forecast of mid-year.
While the U.S. economy and job markets were solid, home price gains slowed or prices fell in the fourth quarter, the MBA said.
Subprime borrowers, or those with weak credit, are more vulnerable when home price appreciation fades and interest rates on their adjustable-rate loans jump.
Troubles in subprime loans helped trigger the highest overall mortgage delinquency rates in 3-1/2 years, and the highest share of home loans entering the foreclosure process last quarter than at any time in the MBA's 37 years of conducting a national mortgage delinquency survey.
The National Association of Realtors (NAR) on Tuesday also lowered its forecasts for home sales and construction, although the group still predicts a housing recovery this year.
David Lereah, chief economist at NAR, said subprime lending problems could further inhibit housing.