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US Home Loan Demand Drops as Mortgage Rates Rise Reuters1/17/07 By Julie Haviv U.S. mortgage applications fell last week, reflecting a drop in demand for home purchase loans as interest rates climbed, an industry trade group said on Wednesday.The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and purchasing loans, decreased 0.6 percent to 667.2 for the week ended Jan. 12. However, applications were 8.8 percent above their year-ago level. The four-week moving average volume of applications for home loans, which smoothes the volatile weekly figures, rose 0.8 percent. Bob Moulton, president of Americana Mortgage Group Inc., a mortgage broker in Manhasset, New York, said despite the rise in interest rates last week, they are still at enticing levels, which is why many borrowers have been exchanging their adjustable-rate mortgages, called ARMs, for fixed-rate loans. "The new year tends to bring motivation to people to refinance and follow through on other resolutions to get their financial lives in order," he said. "With the anticipation of rates rising and ARMs resetting, and with the holidays over, families are trying to be more proactive to capitalize on favorable interest rates." Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.19 percent, up 0.06 percentage point from the previous week. Interest rates were above year-ago levels of 6.07 percent. The MBA's seasonally adjusted purchase index Home buying may have stabilized after a slowdown and is showing signs of a moderate rebound, analysts say. REFINANCING RISES The group's seasonally adjusted index of refinancing applications The refinance share of applications increased to 49.9 percent from 48.4 percent the previous week. The gap between some fixed- and floating-rate loan rates is slim. Fixed 15-year mortgage rates averaged 5.92 percent, up from 5.85 percent. Rates on one-year adjustable-rate mortgages (ARMs) increased to 5.85 percent from 5.79 percent. The narrowing gap between these two types of loans has been luring consumers to fixed-rate loans and away from ARMs. The ARM share of activity increased to 21.2 percent from 20.1 percent the previous week when it was at its lowest since July 2003. The MBA's survey covers about 50 percent of U.S. retail residential loans. Respondents include mortgage banks, commercial banks and thrifts.
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