U.S. mortgage applications rose
last week even as interest rates jumped to their highest levels
since mid-March, data from an industry group showed on

Demand for home purchase loans, an indicator of home sales,
far outweighed that for refinancing. The increase may help
gauge how the hard-hit U.S. housing market is faring this
spring, the peak home buying season.

The Mortgage Bankers Association said its seasonally
adjusted index of mortgage applications , which
includes both purchase and refinance loans, for the week ended
May 1 increased 2.0 percent to 979.7.

Jason Braford, ZipRealty district director in Las Vegas,
said despite the rise in rates last week, low interest rates on
mortgages have made a significant impact on buying activity.

First-time buyers and investors are finding record-low
mortgage rates and home prices at levels last seen in the late
1990s incredibly attractive - with transactions increasing 70
percent year-over-year in Las Vegas, he said on Tuesday.

Borrowing costs on 30-year fixed-rate mortgages, excluding
fees, averaged 4.79 percent, up 0.17 percentage point from the
previous week when it nearly matched the all-time low of 4.61
percent set in the week ended March 27. The survey has been
conducted weekly since 1990.

It was the highest since 4.89 percent in the week ended
March 13. Interest rates, however, were well below year-ago
levels of 5.91 percent.

The U.S. housing market is in the worst downturn since the
Great Depression and its impact has rippled through the
recession-hit economy, as well as the rest of the world.
Economists contend that the economy might not emerge from its
slump unless the housing market stabilizes.

Braford said buyers who are looking to trade up or relocate
are finding it difficult to do so due to current national
economic conditions.

These buyers are often finding it takes longer to sell
their original home before they can trade-up to another
property or relocate, he said.

However, the opposite is true for first-time buyers, as
this group is enjoying the perfect real estate storm of lower
prices, an $8,000 tax credit and historically low interest
rates, he said.

Low mortgage rates have and should continue to spur demand
for home refinancing loans. Lower monthly payments provide a
bit of relief to strapped consumers amid rising unemployment
and a shrinking economy.

After three consecutive weeks of declines, low rates may
have played a role in the rise in demand for loans to purchase
homes last week.

The MBA's seasonally adjusted purchase index
rose 5.0 percent to 264.3. The index, however, came in well
below its year-ago level of 381.3.

The four-week moving average of mortgage applications,
which smooths the volatile weekly figures, was down 6.0


The Mortgage Bankers seasonally adjusted index of
refinancing applications increased 1.2 percent to

The refinance share of applications decreased to 74.4
percent from 75.3 percent the previous week. The
adjustable-rate mortgage share of activity was unchanged at 2.1

Fixed 15-year mortgage rates averaged 4.57 percent, up from
4.45 percent the previous week. Rates on one-year ARMs
increased to 6.36 percent from 6.23 percent.