By Mike Colpitts
The U.S. housing market is taking one small step forward at a time. Little by little it is improving. The Mortgage Bankers Association report added to the chorus of reports indicating the small steps forward with its mortgage applications survey today, which showed a small increase in applications for mortgages last week.
The bankers Market Composite Index rose 1.3% pushed by lower mortgage rates for the fifth week in a row as homeowners turned out in greater numbers applying to refinance homes. Refinancings were 2% above the week earlier and at the highest level since early April.
Record low mortgage rates triggered the increase in refinancing, but home loan applications fell slightly for the week. With rates so low, in May 85% of those seeking purchase applications applied for fixed rate mortgages. The number of applications for 15-year fixed mortgages is at its highest level on record.
Rates were at their lowest levels beating historic lows for the fifth straight week. The average fully executed mortgage on a 30-year fixed rate loan dropped to 3.87% on 80% loan-to-value mortgages in the bankers’ survey. FHA mortgages averaged even lower, hitting 3.70% for the second week in a row.
The Freddie Mac loan average is customarily lower on a weekly basis, but the difference between the two rates is that the bankers’ rate reflects mortgages that are actually closed and not just quoted by loan agents.
The 15 year fixed rate loan was also the lowest on record for the second week in a row.
Bankers sold fewer adjustable rate mortgages for the week as consumers continued to take out fixed rate loans because of the record low rates. The average ARM on a 5/1 loan closed at 2.78%, up a single basis point from the prior week.