Mortgage applications continue to rise

SUBPRIME MARKET CRISIS/ IMPACT

Mortgage applications gained 3.4 percent last week to the highest level in almost three months, showing there is still demand to buy homes.

The Mortgage Bankers Association's index of applications to purchase a home or refinance debt rose to 678.7, from 656.5 the prior week. The last time the gauge was this high was the week ended May 18.

Job security and lower home prices may be encouraging some buyers even as more credit restrictions make it more difficult to qualify for a loan. Greater interest in purchasing could help reduce the built-up inventory of unsold homes and eventually lead housing out of its two-year recession, economists said.

``Housing is probably the area of greatest uncertainty,'' Julia Coronado, a senior economist at Barclays Capital in New York, said before the report. ``We still think the best estimate is it will continue to contract though at a slower pace.''

The mortgage group's purchase applications measure rose 3.9 percent to 464.9, the highest since the first week of January, from 447.4 a week earlier, today's report showed. The index of refinancing increased 2.6 percent to 1929.6, from 1881.1 a week earlier.

Lower interest rates may be attracting potential buyers and pushing existing home owners to refinance. While the average on a 30-year fixed loan rose last week, it was 16 basis points below the month earlier level. A basis point is 0.01 percentage point.

The average rate on a 30-year fixed loan was 6.45 percent, the mortgage bankers group said, compared with 6.41 percent a week earlier and 6.60 percent a month ago.

At the current rate, borrowing costs for each $100,000 of a mortgage would be $628.78 a month.

The average rate on a 15-year mortgage increased to 6.19 percent, from 6.16 percent a week earlier. The one-year adjustable rate rose to 5.81 percent, from 5.69 per cent.

The share of applications to refinance loans held at 39.9 percent last week. Adjustable-rate mortgages increased to 21 percent of all applications, from 20.4 percent a week earlier.

The number of purchase applications may also be elevated because borrowers who had previously been rejected are reapplying for loans, and some consumers are applying to several lenders in hopes of getting approved by at least one, economists have said.