U.S. mortgage applications rose for the first time in four weeks as long-term home loan interest rates plunged to their lowest levels since March, data from the industry's main trade group showed on Wednesday.
The Mortgage Bankers Association in a statement said its seasonally adjusted index of mortgage application activity for the week ended August 4 rose 4.9 percent to 553.3, from the previous week's 527.6.
Borrowing costs on 30-year fixed-rate mortgages last week averaged 6.45 percent, down from 6.62 percent in the previous week and the lowest since the week ending March 24. Last week's rate is 0.41 percentage point below its four-year high, touched in mid-June, according to MBA figures.
The worst of the housing market is behind us, said Richard Yamarone, chief economist at Argus Research in New York, before the MBA data was published. That's simply because the two primary drivers of housing - interest rates and demographics - are improving.
The housing market has stumbled since last year as rising interest rates slowed demand for homes, resulting in burgeoning inventories and slower house price appreciation across the United States.
The reprieve in mortgage costs since June followed growing speculation that a slowing economy would curb inflation and prompt the
Federal Reserve to end its interest rate increases that it began more than two years ago.
The Fed after meeting on Tuesday left its federal funds rate at 5.25 percent, as widely expected.
The MBA's seasonally adjusted purchase mortgage index climbed 3.4 percent to 388.9 last week from 376.2, though it compares with levels near 500 a year ago. The index of refinancing activity climbed 7.1 percent to 1,518.1 from 1,417.2.
LOWER BORROWING COSTS
A borrower of $250,000 would pay about $70 less each month on a 30-year fixed-rate loan taken out last week versus June.
Fixed-rate mortgages continued to gain popularity over adjustable-rate loans, the MBA said. The ARM share of activity fell to 27.6 percent of all applications last week, the lowest level since March 2004.
The average rate on a one-year ARM declined to 5.96 percent last week from 6.18 percent.
The MBA's survey covers about 50 percent of all U.S. retail residential mortgage loans. Respondents include mortgage bankers, commercial banks and thrifts.