Home loan demand rises as interest rates tumble

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NEW YORK, Sept 13 (Agencies): Mortgage applications rose for a second straight week, fuelled by demand for home loans as interest rates sank to their lowest since May, an industry group's figures showed Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, rose 5.5 per cent for the week ended September 7.
Applications were 12.5 per cent above their year-ago level. But the four-week moving average of mortgage applications, which smooths the volatile weekly figures, was down 0.8 per cent to 634.2.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.25 per cent, down 0.17 percentage point from the previous week, their lowest since the week ended May 18 when they stood at 6.23 per cent. Interest rates were also below year-ago levels at 6.32 per cent.
Yields on 10-year US Treasury notes, which are linked to mortgage rates, fell last week for a fourth straight week to a 19-month low as investors grew more confident the Federal Reserve will cut benchmark rates at its policy-making meeting on September 18.
The MBA's seasonally adjusted purchase index rose 5.2 per cent to 448.0. The index was 9.2 per cent above its year-earlier level.
The group's seasonally adjusted index of refinancing applications rose to 1,876.6, 6 per cent above the prior week. The index was up 17.5 per cent from a year earlier.
The refinance share of applications increased to 42.1 per cent from 41.4 per cent the previous week.
Last week, fixed 15-year mortgage rates averaged 5.90 per cent, falling 0.2 percentage point from 6.10 per cent.
Rates on one-year adjustable-rate mortgages (ARMs) decreased to 6.34 per cent from 6.52 per cent. Rates on ARMs fell for the first time in five weeks.
The ARM share of activity increased to 13.2 per cent, up from 12.6 per cent the previous week.
The MBA's survey covers about 50 per cent of all US retail residential loans. Respondents include mortgage banks, commercial banks and thrifts.
Recent US housing industry indexes, while volatile, generally point to a weak outlook for the industry, suggesting a delayed recovery for the hard-hit sector.
Meanwhile, a town in central California has become ground zero in the wave of foreclosures plaguing the US housing market in the wake of the sub-prime lending crisis.
With a population of nearly 300,000, Stockton has acquired the unfortunate distinction of having the highest foreclosure rate of any US city, with one in 27 households left counting the cost of the credit crunch, according to Realtytrac, an online marketplace for foreclosure sales.
Stockton's Weston Ranch neighborhood, a 15-year-old subdivision of modest tract homes, has the worst foreclosure rate in the area, according to ACORN, a national advocacy group for low and moderate-income families.
"It's not the CEO of Intel who lives in Weston Ranch, but the guy who details his car," Geri Taylor, broker at Weston Ranch Realty for twelve years told the news agency. "They just were not prepared for this."
Adjustable rate mortgages offered to sub-prime borrowers, hopeful homeowners with shaky credit, lured families into houses with inflated prices, said Taylor.
"Many financed one hundred per cent of the price, and some even financed the closing costs," she said. "They got in at a teaser rate thinking this neighbourhood would be commutable and affordable, and then the rates went up."
Sign-after-sign beckon to potential buyers on the Weston Ranch streets.
"American Dream Realty-Reduced Price!" reads one placard spiked into a brown lawn.