Unexpected Increase in Mortgage Applications

In a lone bright spot of economic news this week, mortgage applications increased last week in a time that is typically slow for home purchases.

According to the Mortgage Bankers Association, mortgage applications rose by 1.5 percent from a bump in loans acquired for home purchases. MBA’s Government Purchase Index rose 8.5 percent, and applications for conventional mortgages were up 3.8 percent.

Adjustable rate mortgages also increased to 3 percent of all new mortgage applications from 2.6 percent the week prior, even as the interest rates for one-year ARMs rose, averaging 6.87 percent from 6.8 percent last week.

Interest rates fell on fixed rate mortgages, however. Rates on 30 year fixed-rate mortgages averaged 5.99 percent last week from 6.16 percent the week prior; 15 year fixed-rate mortgages averaged 5.78 percent from 5.87 percent.

MarketWatch says applications for mortgages to buy homes rose a seasonally adjusted 5.3 percent on a week-to week basis while refinancing fell 2.1 percent.

Refinancing accounted for 49.3 percent of mortgage activity in the week, down from 49.9 percent the previous week.

Of the mortgage applications taken in October, 32.9 percent were for government-insured loans according to MBA data, which is up from a 10.3 percent share in October of 2007.

David Kittle, the Washington-based MBA's chairman, said in a statement, “This increase in the share of government-insured mortgage applications provides further evidence that there are still loans available to qualified borrowers, particularly through the FHA."

Temporary limits rose on FHA and conforming loans in most areas of the country after President Bush signed the Economic Stimulus Act of 2008 in February.