Applications Pick Up, Purchase Volume Strongest in 18 Months

Mortgage applications saw a slight bump in the recent holiday week, according to the ""Mortgage Bankers Association's"":http://www.mortgagebankers.org/default.htm (MBA) Weekly Mortgage Applications Survey.

[IMAGE]

The survey's Market Composite Index, a measure of mortgage loan application volume, increased 3.4 percent on a seasonally adjusted basis for the week ending February 1. The results include an adjustment for the Martin Luther King holiday, MBA said.

On an unadjusted basis, the index increased 16 percent week to week.

The seasonally adjusted Purchase Index rose 2 percent from the previous week, reaching its highest level since the first week of May 2010. The unadjusted Purchase Index increased 21 percent compared to the week prior.

Meanwhile, the Refinance Index increased 4 percent last week. The refinance share of mortgage activity fell, however, dropping to 78 percent of total applications from [COLUMN_BREAK]

79 percent previously. According to the association, refinance share is at its lowest observed level since early July 2012.

Interest rates rose last week, increasing to 3.73 percent for a 30-year fixed-rate conforming loan (from 3.67 percent before). Average rates on 30-year fixed-rate mortgages have risen for seven of the last eight weeks, MBA reported.

""Capital Economics"":http://www.capitaleconomics.com/ also issued its data for mortgage application activity throughout January, observing that application volume for purchase loans was the strongest it's been in a year and a half.

For the month, Capital Economics noted refinancing volume was down 4 percent from December, marking the sixth monthly drop in the past seven months. In addition, the Refinance Index's 8.8 percent year-over-year growth in January was lower than the growth in purchase applications for the first time in 14 months.

On the other hand, applications for home purchase loans grew 1.8 percent month-over-month, reaching their highest level in 18 months.

Property economist Paul Diggle said the increase in purchase applications fits with the findings from the Federal Reserve's latest Senior Loan Officer Survey (SLOS).

""A net balance of 29 percent of banks responding to the SLOS reported stronger demand for prime mortgages in the three months to January,"" Diggle noted. ""And lenders appear more likely to accept those applications--a net balance of 5 percent reported loosening credit conditions for mortgages. The housing recovery needs traditional mortgage-dependent buyers to be sustained, and they now appear to be joining the party.""