U.S. mortgage rates fall for second straight week; applications rise 3.4%

【Financial News, New York = Correspondent Lee Byung-chul】 U.S. mortgage rates fell for a second consecutive week, driving an increase in applications. However, with rates still in the 7% range, demand for home purchases and refinancing remains well below last year's levels. In particular, borrowers seeking to reduce interest costs are shifting toward adjustable-rate loans, which carry relatively higher risks.
 On the 28th (local time), according to the U.S. Mortgage Bankers Association (MBA), total mortgage applications rose 3.4% last week from the previous week. The average contract rate on 30-year fixed-rate mortgages fell 0.04 percentage points, from 7.41% the previous week to 7.37%.
 Joel Kan, MBA vice president and deputy chief economist, explained, "The decline in rates eased some of the burden on borrowers, leading to a slight rebound, particularly in conventional mortgage applications." He noted, however, that "mortgage rates are still at least 1 percentage point higher than at the same time last year."
Mortgage applications to purchase homes rose 4% from the previous week but were down 18% from the same period a year earlier. Applications to refinance existing loans also increased 3% week over week, but plunged 61% from the same period last year.
This is because existing homeowners are holding on to loans with lower interest rates. According to the Federal Housing Finance Agency (FHFA), about half of all mortgage borrowers have rates below 4%. Existing homeowners' reluctance to take out new loans at higher rates is also hindering a recovery in home sales.
By contrast, adjustable-rate mortgage (ARM) applications accounted for 11.3%, the highest share in more than a year. The average rate on adjustable-rate mortgages with a fixed rate for the first five years was 6.41%, 0.96 percentage points below the 30-year fixed rate. In effect, more borrowers are taking on the risk of future rate fluctuations to reduce their immediate interest costs.



[email protected] Correspondent Lee Byung-chul Reporter