Applications for new U.S. mortgages increased last week, even as interest rates jumped to their highest levels since mid-March, according to Wednesday industry group data. Demand for home purchase loans, an indicator of home sales, outweighed that for refinancing, the Mortgage Bankers Association found. The group said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week that ended on May First, increased 2.0 percent to 979.7. Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 4.79 percent, up 0.17 percentage point from the previous week when it nearly matched the all-time low of 4.61 percent set in the week ended March 27. The survey has been conducted weekly since 1990. It was the highest since 4.89 percent in the week ended March 13. Interest rates, however, were well below year-ago levels of 5.91 percent. The U.S. housing market is in the worst downturn since the Great Depression of the 1930s, and its impact has spread through the U.S., and global economies. Economists contend that the economy might not emerge from its slump unless the housing market stabilizes. Low mortgage rates have and should continue to stimulate demand for home refinancing loans. Lower monthly payments provide a bit of relief to strapped consumers amid rising unemployment and a shrinking economy. After three consecutive weeks of declines, low rates may have played a role in the rise in demand for loans to purchase homes last week.
