With rock-bottom mortgage rates, U.S. homebuyers' consumer confidence could be improving in spite of flagging job growth and a stagnant housing market.
Fueled by an increase in refinancing, loan applications for homes rose 1.3 percent last week in the U.S. mortgage markets index to 804.8 from 794.7 in the prior week, according to data released by the Washington-based Mortgage Bankers Association. During this period, the mortgage refinance index climbed 2 percentage points while the seasonally adjusted mortgage purchase index slumped 1.8 percentage points. Meanwhile, the average 30-year mortgage rate plunged 4 basis points to a new six-week low of 3.87 percent.
Demand for home refinancing scaled up in response to historically low mortgage interest rates, offering a fresh spurt of hope to underwater homeowners - borrowers whose homes are worth far less than the mortgage payments they owe. Refinances facilitated by the Home Affordable Refinance Program nearly doubled during the first quarter of this year, to 180,000 from 93,000 in the last quarter of 2011, according to a March 2012 refinance report released by the Federal Housing Finance Agency on June 1. Refinancing accounted for about 70 percent of all mortgage applications.