Mortgage applications in the U.S. increased 2.9 percent last week as more homeowners refinanced to take advantage of lower interest rates.
The Mortgage Bankers Association’s index of applications to buy a home or refinance a loan rose to 841.4 from a revised 817.7 a week earlier. The group’s refinancing index increased 6.5 percent, while the purchase gauge dropped 4.5 percent.
Declining mortgage rates, brought on by Federal Reserve actions to purchase mortgage-backed debt, are making it more attractive for existing loan holders to refinance. Even so, the faltering economy continues to discourage home purchases.
“Sales have pretty much flattened out all year,” Richard DeKaser, senior economist at National City Corp. in Cleveland, said before the report. “It’s still a bad market. A broader- based rebound remains far in the future.”
The refinancing gauge rose to 4156 from 3901.9 the prior week, while the purchase index fell to 286.1 from 299.6.
The Fed yesterday cut its target federal funds rate to a range of zero percent to 0.25 percent and said it will do whatever is necessary to ease the recession.
“Weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time,” the Federal Open Market Committee said in a statement.
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