Real Estate

Mortgage applications heat up as lower rates attract homebuyers


US applications for home loans continue to rebound, hitting an 11-month high last week as a pullback in mortgage rates fuelled a sharp increase in purchasing activity.

Elevated prices and rising mortgage rates, which surged to eight-year highs last fall, weighed on the housing market in 2018. But mortgage rates have swung lower in recent weeks amid diminished expectations for further interest rate rises by the Federal Reserve, encouraging more consumers to jump back into the market.

The turnround in rates, combined with an increase in listings, has brightened the outlook for the housing market heading into the busy spring selling season, according to the Mortgage Bankers Association. Mike Fratantoni, the MBA’s senior vice-president and chief economist, called an 11 per cent gain in purchase volume year-over-year a “promising sign.” The group’s purchase index, measuring mortgage applications to buy a home, is now at its highest level since April 2010 on a seasonally adjusted basis.

“Uncertainty regarding the government shutdown, slowing global growth, Brexit, a more patient Fed, and a volatile stock market continued to keep rates from increasing,” Mr Fratantoni said. “The spring homebuying season is almost upon us, and if rates stay lower, inventory continues to grow, and the job market maintains its strength, we do expect to see a solid spring market.”

In total, the mortgage composite index was up 13.5 per cent from the prior week based on the MBA’s weekly survey. Refinancing activity was also strong, with volume growing 19 per cent. Purchase volume improved by 9 per cent week-over-week.

The average rate on a 30-year fixed-rate mortgage was 4.74 per cent, unchanged week-over-week but down from a recent peak of 5.17 per cent in November.

The latest housing data bodes well for home sales and builders. In November, the most recent month of data, existing home sales notched their second straight month of gains. The National Association of Home Builders said Wednesday that confidence among its members rebounded from a more than three-year low in January, with the gradual decline in rates sustaining builder sentiment.

Lennar, the second-largest US homebuilder, saw increased traffic in December and is optimistic that buying activity will improve heading into the spring, according to chief executive Richard Beckwitt. Fellow builder KB Home beat Wall Street’s estimates for fourth-quarter earnings after selling more homes.



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