Refinance loans up 21%

Refinance loans up 21%

Demand for home loans rose to a six-week high on a mini refinance wave, with borrowers pushing to lock in rates before they climb later this year, the Mortgage Bankers Association (MBA) said today. Applications to buy homes and refinance loans jumped last week to mid-December levels as average 30-year mortgage rates held near 5%. The industry group's mortgage index jumped 21% last week, fueled by a 26.3% leap in demand for refinancing as purchase loan requests increased 10.3%. The 30-year mortgage rate dipped 0.01%age point to 5.01%. But this borrowing cost was 0.40%age point above the record low set last March and seen headed higher throughout the year. "Rates continue to hover around 5%, quite low by historical standards, but are well above the record lows seen in 2009 and hence are not generating substantial refi volume," said Michael Fratantoni, MBA's vice president of research and economics.

Affordability remains high with mortgage rates still historically low and average home prices plunging about 30% from 2006 peaks before stabilizing since last summer. The government's bonus to first-time and move-up buyers via a tax credit remains in place for several more months, luring buyers who have been sitting on the sidelines waiting for some signs of stability. "I do think the housing recovery in the U.S. still has legs and is firmly in tact," said Ian Pollick, economics strategist at TD Securities in Toronto. "There's a lot of pent up demand in the system right now, there are a lot of really really good deals."

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