U.S. mortgage rates fell
last week to the lowest in a decade of record-keeping, the
Mortgage Bankers Association of America said. That has prompted a
surge in refinancing and helped maintain the economic recovery.
The average U.S. 30-year fixed mortgage rate fell to 6.26
percent from 6.31 percent in the prior week, the group said. An
index of applications to refinance mortgages surged 28.7 percent
to 3512.4, the highest since the week ended Nov. 23.
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By allowing homeowners to use their houses as a source of
cash, refinancing underpins consumer spending, which accounts for
two-thirds of the economy.
“The housing market has been going strong, which is good
for us,” Ed Clark, vice president of operations at lamp importer
Quoizel Lighting in Charleston, South Carolina, said in an
interview before the report. “We’re looking to sell 6 percent
more than we did last year, and right now we’re pretty well on
target.”
Refinancing, which accounted for 61.2 percent of all mortgage
loan applications last week, reached a record in the first week of
November, when the gauge rose to 5534.5. The 15-year fixed
mortgage rate fell to 5.7 percent from 5.75 percent. The one-year
adjustable rate mortgage declined to 3.96 percent from 3.97
percent.
Purchase Applications
The mortgage bankers’ purchase index, a measure of housing
demand, fell to a two-month low of 351.4 in the week that ended
Friday. Last year, when home sales were a record, the purchase
index rose to a high of 350.9. The gauge has exceeded that level
for the last two months, suggesting 2002 will surpass last year as
the best for the industry.
“New orders, we call them sign-ups, were up some 60
percent” in the second quarter from the same period last year,
said Mark O’Brien, chief executive of Pulte Homes Inc., in an
interview with Bloomberg Television. “And I can assure you that
the traffic in our communities is as high as it’s ever been.”
Countrywide Credit Industries Inc., the largest independent
mortgage lender, said second-quarter profit rose 55 percent as low
interest rates boosted home sales and refinancing.
“Where I’ve seen the biggest increases are among first-time
home buyers and young people, who were so big into the stock
market and” now view homes as a better investment relative to
shares, Gretchen Bryce, a real estate agent who sells homes in the
East Bay area outside of San Francisco, said in an interview last
week. She said her sales were 5 percent higher than the same time
last year.
Stocks
U.S. stocks surged today. The Standard & Poor’s 500 stock
index fell rose 5.7 percent, the first gain in five sessions. The
benchmark index has fallen almost 27 percent this year, the
largest decline since a 39 percent drop in 1937.
At the current 30-year fixed mortgage rate, the average
monthly principal and interest payment on a $100,000 mortgage is
$619.62. The monthly payment was $664.63 a year ago, when the rate
was 6.99 percent.
U.S. sales of new homes soared in May to a record 1.03
million houses at an annual rate, which mean sales in 2002 are
likely to beat the record 908,000 homes sold in 2001. U.S. sales
of previously owned homes sold at a 5.75 million-unit pace in May.
The mortgage bankers’ survey measures applications against a
base level of 100 set in the week ended March 16, 1990. The survey
covers 40 percent of the U.S. residential mortgage market.
Bloomberg News
