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US mortgage activity hits 2-month high as interest rates fall

Mortgage applications increase 1.6 per cent; refinancing applications also up, by 1.8 per cent

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Mortgage rates have fallen in step with US Treasury yields due to worries about slowing economic growth, financial market volatility and trade tension between China and the US.

New York

US borrowers filed the most loan requests to buy a home and to refinance one in two months as most lending costs declined to their lowest levels since September, the Mortgage Bankers Association (MBA) said on Wednesday.

The Washington-based group's seasonally adjusted index on mortgage applications increased 1.6 per cent to 346 in the week ended Dec 7. This was the strongest reading since the week of Oct 5 when it was 346.7.

Interest rates on 30-year, fixed-rate conforming mortgages with balances of US$453,100 or less averaged 4.96 per cent last week, the lowest level since the week of Sept 28. They averaged 5.08 per cent the prior week.

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The weekly drop in the 30-year conforming mortgage rate was the steepest since March 2017.

Mortgage rates have fallen in step with US Treasury yields due to worries about slowing economic growth, financial market volatility and trade tension between China and the US.

Other home borrowing costs MBA tracks decreased by 8 basis points to 9 basis points from the week before.

Last week, the benchmark 10-year Treasury note yield declined by 16 basis points, which was the biggest weekly fall since October 2015.

"Trade fears dominated investors' concerns, and this was amplified by data released by the US Commerce Department showing a widening trade deficit," Joel Kan, MBA's associate vice president of economic and industry forecasting, said in a statement.

He was referring to government data released last Thursday that showed the US trade gap deteriorated to its worst level in 10 years in October.

Falling mortgage rates rekindled submission of loan requests for home purchase and refinancing.

MBA's seasonally adjusted index on purchase loan applications, a proxy on future housing activity, rose for a fourth straight week to 256.1, its strongest reading since the week of July 6.

Higher interest rates, together with rising home prices, have raised the cost of buying a home.

In the third quarter, monthly mortgage payments for first-time US homebuyers grew by 15 per cent year-over-year, according to a report from Genworth Mortgage Insurance released on Wednesday.

From January to September, first-time homeowners bought 1.58 million single-family homes, the most in the first nine months of the year since 2005, Genworth said.

Meanwhile, MBA's barometer on refinancing climbed further from a near 18-year trough reached three weeks earlier. It rose 1.8 per cent from the previous week to 851.6.

The share of refinancing applications grew to 41.5 per cent last week, the biggest since March and larger than 40.4 per cent the prior week, MBA said. REUTERS