NEW YORK, NY - Near record low mortgage rates sent mortgage applications shooting higher last week, especially for refinances, according to an industry report. The Mortgage Bankers Association reported that its overall Market Composite Index, a measure of mortgage loan application volume, shot up 48 percent on a seasonally adjusted basis for the week ending Dec. 19.
That was driven by a 62.6 percent leap in the group's Refinance Index. But the Conventional Purchase Index also increased 17.7percent. The only component of the overall index to fall was the Government Purchase Index, which largely tracks FHA loans. It slipped 3.4 percent.
The Federal Reserve announced last week that it had cut its benchmark fed funds rate to nearly 0 percent, and it also announced it would buy more mortgage-backed securities issued by Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500), moves designed to jumpstart the faltering U.S. economy partly by taking mortgage rates lower.
And the moves by the central bank helped lower mortgage rates. Freddie Mac's survey of mortgage rates showed more than a quarter-percentage-point drop to the lowest level in the 37-year history of the survey. The 30-year fixed rate mortgage fell last week to 5.19 percent from 5.47percent the week before.
But the jump in mortgage applications and the low rates are a rare bit of good news for the battered housing and home building markets. The report comes a day after the National Association of Realtors reported the number of existing homes sold during November plummeted 8.6 percent as prices plunged by record amounts. New home sales were also lower, according to a government report. And housing starts and building permits now stand at record low levels.
Source: CNNMoney.com