U.S. mortgage applications jumped by nearly 50 percent last week as home loan rates fell after the Federal Reserve cut interest rates and took steps to restore bond market confidence, an industry trade group said Wednesday.
The Mortgage Bankers Association's mortgage applications index jumped 48.1 percent to a seasonally adjusted 965.9 in the week ended March 21, its highest level since early February.
An 82 percent surge in refinancing applications overshadowed a 10.6 percent rise in home purchase loan requests, lifting total applications from the previous week, when home loan demand sank to the lowest since end-December.
"The Federal Reserve acted last week to bring some stability to the mortgage-backed securities market and we saw an immediate impact with a drop in mortgage rates," Jay Brinkmann, the MBA's vice president of research and economics, said in a release.
The Fed last week slashed official lending rates by 0.75 percentage point, slashing the benchmark federal funds rate to 2.25 percent, its lowest in more than two years.
Average 30-year home loan rates fell 0.24 percentage point to 5.74 percent, the lowest since 5.72 percent in early February, according to the trade group.
Easing up on monetary policy is one of a host of government tools now being used to shore up shaken markets, which froze bond markets and stunted the willingness of many lenders to extend credit.
Lending practices remain tighter, and home prices keep falling. Many borrowers who can still qualify for home loans are waiting for even more cheapening, some analysts said.
The Fed also said this month that it would accept a broader range of collateral, including some mortgage bonds not guaranteed by Fannie Mae and Freddie Mac , in a new securities lending program aimed at boosting market liquidity. Last week, the Fed further expanded the types of mortgage bonds included in this program.
On a four-week moving average, which adjusts for volatility, total applications rose 11.3 percent, while the purchase index gained 3.1 percent and the refinancing index climbed 18.3 percent.