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With mortgages at 4%, demand for home-purchase loans rises

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With 30-year mortgage rates still averaging a rock-bottom 4%, applications to purchase homes rose after Thanksgiving to the highest level in four months.

Freddie Mac's weekly report on home lender offerings, released Thursday, showed the typical rate for a 30-year loan at 3.99%, the sixth straight week at or slightly below 4%.  Last year at this time, the 30-year fixed loan averaged 4.61%.

Fifteen-year fixed-rate home loans, a popular option for people refinancing homes, averaged 3.27%, down from last week's 3.3%. A year ago, the 15-year loan averaged 3.96%, Freddie Mac said.

The big government-backed mortgage buyer asks lenders what rates they are offering to borrowers with good credit and 20% down payments or 20% equity if they are refinancing. The rates are for loans of up to $417,500 with the borrowers paying about 0.75% of the loan amount in lender fees and points.

The typical mortgage rate for larger "jumbo" loans was running about a third of a percentage point higher, according to another report this week, this one from the Mortgage Bankers Assn. Jumbo loans are priced higher because lenders can't sell them to Freddie Mac and Fannie Mae, the other big government-sponsored mortgage buyer. 

Offering a bit of hope for housing at a time when foreclosures are drawing angry protests and government investigations, the mortgage bankers said applications for loans to buy houses reached the highest level since early August.

Refinances still made up about three-quarters of all applications for home loans, however.

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Proposed: Short, sweet credit card form that puts costs in big type

-- E. Scott Reckard

Photo: Occupy LA protests a foreclosure auction in Norwalk. Credit: Genaro Molina /Los Angeles Times

Use of 'target-date' funds grows in 401(k) plans

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There is a bit of good news in the world of retirement investing.

According to a new study, Americans are increasing their use of so-called target-date mutual funds in 401(k) plans, and most people report being satisfied with them.

Among active and knowledgeable investors, use of target funds has nearly doubled to 41% today from 22% in 2005, according to the survey of more than 1,000 people by investment firm AllianceBernstein.

Among neophytes -- what the firm terms "accidental" investors, who handle their own 401(k) investing only because they must -- 1 in 4 people use target funds, up from 16%.

Target funds typically buy a variety of underlying mutual funds to create a diversified portfolio based primarily on a person's age and expected retirement date. Though target funds have shortcomings and risks, they're generally considered to be a wise choice for unsophisticated 401(k) investors because they handle much of the decision-making, such as which individual funds to buy and how much.

Employees seem to be happy with target funds: 81% of those surveyed said they're as satisfied or more so with them as with the other funds in their plans. Most people understood that the funds are designed to become more conservative as participants near retirement age, according to AllianceBernstein.

Still, Americans feel disillusioned overall about their retirement prospects.

The percentage of people who feel confident in their ability to achieve a comfortable retirement has risen to 26% from 18% in 2009, according to the survey. but that's down from 41% in 2007, prior to the global financial crisis. And even then, only 2 in 5 people feeling upbeat about their retirement prospects was nothing to crow about.

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-- Walter Hamilton

Photo credit: Mark Boster/Los Angeles Times

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