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US home loan demand climbs as rates hold steady ReutersWed Oct 17, 2007 12:09pm EDT By Julie Haviv NEW YORK, Oct 17 (Reuters) - U.S. mortgage applications rose for a second straight week, an industry group said on Wednesday, largely reflecting multiple requests by borrowers as banks tighten lending standards. The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications <USMGM=ECI>, which includes both purchase and refinance loans, increased 0.7 percent to 656.3 for the week ended Oct. 12. The MBA's data counts all applications, including borrowers who are ultimately denied. Economists increasingly dismiss the figures as inflated by prospective borrowers who have been forced to scramble for a loan. Overall mortgage applications last week were 12 percent above their year-ago level, even as existing and new home sales are down more 10 percent from 2006. The four-week moving average of mortgage applications, which smooths the volatile weekly figures, was down 0.6 percent 649.8. Bob Moulton, president of Americana Mortgage Group Inc., a mortgage broker in Manhasset, New York, said while consumers are still applying for home loans, they are not necessarily closing on them. "Borrowers are still thinking days of old when you could buy a house and put 10 percent down with a mediocre credit score," he said. "Economists are calling for a bottom in housing in 2008 so I would be cautiously optimistic about that because it might even go longer." Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.40 percent, unchanged from the previous week. Interest rates were above year-ago levels at 6.33 percent. The MBA's seasonally adjusted purchase index <USMGPI=ECI>, rose 2.1 percent to 429.1. The index climbed 11.5 percent from its year-earlier level of 384.7. The group's seasonally adjusted index of refinancing applications <USMGR=ECI> decreased 1.1 percent to 1,980.9. The index was up 12.7 percent from its year ago level of 1,758.2. The refinance share of applications decreased to 45.3 percent from 46.2 percent the previous week. Fixed 15-year mortgage rates averaged 6.09 percent, up from 6.03 percent. Rates on one-year adjustable-rate mortgages (ARMs) increased to 6.17 percent from 6.15 percent. The ARM share of activity decreased to 13.5 percent, down from 13.6 percent the previous week. HOUSING OUTLOOK BLEAK Recent U.S. housing industry indexes, while volatile, generally point to a weak outlook for the industry, suggesting a delayed recovery for the hard-hit sector. The Commerce Department said on Wednesday housing starts dropped 10.2 percent last month to an annual pace of 1.191 million units, the slowest pace since March 1993. Building permits fell 7.3 percent, the sharpest decline since January 1995, to an annual rate of 1.226 million. The MBA's data, which covers about 50 percent of all U.S. retail residential loans, may be overstating activity since it includes only retail lenders such as mortgage banks, commercial banks and thrifts, said Michelle Meyer, an economist at Lehman Brothers in New York, in commentary published Wednesday. She said those lenders may be benefiting from a pull back by wholesale lenders such as mortgage brokers who are major participants in the loan origination market. The MBA said the latest week's data were adjusted for the Columbus Day holiday on Monday, Oct. 8. (Additional reporting by Patrick Rucker in Washington)
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