With the help of lower interest rates, mortgage applications in the United States climbed higher for the second consecutive week.
According to the Mortgage Bankers Association’s latest report, for the week ended September 20, loan applications jumped 5.5 percent on a seasonally adjusted basis from one week earlier — only the fifth increase in 20 weeks. The figure includes both refinancing and home purchase demand, and covers more than 75 percent of all domestic retail residential mortgage applications.
The industry group’s refinance index gained 5 percent while the seasonally adjusted purchase index increased 7 percent. Overall, the refinance share of mortgage activity accounted for 61 percent of total applications, unchanged from a week earlier, and only 4 percent above its lowest level since April 2010. In fact, the refinance index crashed 71 percent from its peak during the week of May 3 to hit its lowest level since June 2009 earlier this month.
The average interest rate for a 30-year fixed-rate mortgage decreased from 4.75 percent to 4.62 percent. The most recent average rate for a 15-year fixed-rate mortgage came in at 3.68 percent, compared to 3.81 percent the week before. Between the beginning of May and the end of June, the average interest rate for a 30-year fixed-rate mortgage surged from 3.59 percent to 4.68 percent.
Rapidly rising interest rates became a concern earlier this year, as they directly affect affordability. In the second quarter, 69.3 percent of new and existing homes sold were affordable to families earning the U.S. median income of $64,400, according to the National Association of Home Builders. That is down from 73.7 percent in the first quarter and is the first reading below 70 percent since late 2008.
During morning trading, shares of home builders Lennar (NYSE:LEN) and DR Horton (NYSE:DHI) traded relatively flat. Home improvement names such as Home Depot (NYSE:HD) and Lowe’s (NYSE:LOW) fell nearly 1 percent after the housing report. Home Depot and Lowe’s have been among the best-performing names in the housing industry this year, but Lennar and DR Horton have underperformed in the general market.
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