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Mini-boom in refis continues, but where are the purchases?

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Mortgage interest rates are at their lowest levels in five weeks, and not surprisingly more people are seeking home loans, two surveys from big industry players show.

But in an ominous sign for the housing market, the Mortgage Bankers Assn. said in a report today that the increase was driven by people refinancing homes, not buying them. Indeed, a seasonally adjusted index of home purchase applications was at its lowest level since 2000, the mortgage group said.

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The closely watched Freddie Mac report on rates came out this morning, showing 30-year fixed home loans at an average of 4.91% this week for borrowers paying 0.7% in upfront points and fees to lenders.

That was down from 4.98% a week earlier with the same points, and the lowest average rate in five weeks for the survey by the government-controlled loan buyer.

The average rate for 15-year fixed loans fell from 4.40% to 4.36% with 0.6% of the loan amount paid in lender upfront charges, Freddie Mac said. Details were to be posted later today at Freddie’s news site.

The surveys assume borrowers have good credit, can make a 20% down payment and take on no more than $417,000 in debt – the threshold above which loans are categorized as “jumbo” and the rate goes up.

But what does it mean that with rates so low home sale applications are declining, especially since the government’s $8,000 tax credit for first-time home buyers has been extended?

It’s hard to find any news to celebrate about home sales in the Mortgage Bankers Assn. figures. The mortgage bankers’ survey said 30-year fixed rates averaged 4.90% last week for borrowers who paid just over a point upfront.

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It said overall applications for mortgages rose by 3.2% from the previous week, but it was the breakdown by the trade group that was interesting: Refinances were up 11.3% on a seasonally adjusted basis, but purchase loans fell 11.7%. Refinances made up 71.5% of all mortgage applications during the week, the highest since May, when the average rate for a conventional 30-year fixed-rate mortgage dipped to a record 4.69% in the Mortgage Bankers Assn. survey.

-- E. Scott Reckard

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