US home purchase applications increase to highest since April

APPLICATIONS for home-purchase mortgages in the US rose to the highest level since April, signalling housing demand is picking up as borrowing costs hold below 7 per cent.

The Mortgage Bankers Association’s (MBA) index of mortgage applications to buy a home increased 7.5 per cent to 174.3 in the week ended Jan 19, according to data released on Wednesday (Jan 24). The advance followed a 9.2 per cent increase in the prior week that was the largest in a year.

The uptick comes as homebuyers get some relief from mortgage rates that neared 8 per cent during the fall. While the contract rate on a 30-year fixed mortgage increased by three basis points to 6.78 per cent last week, borrowing costs have been holding below 7 per cent for more than a month.

The Federal Reserve has signalled it is done raising interest rates, and the housing industry is anticipating central bankers to start cutting rates this year.

The MBA’s overall index of mortgage applications, both for home purchases and refinancing, increased 3.7 per cent to 218.2, the highest since May. The index for refinancing fell 7 per cent.

The MBA survey uses responses from mortgage bankers, commercial banks and thrifts and has been conducted weekly since 1990. The data cover more than 75 per cent of all retail residential mortgage applications in the US. BLOOMBERG