U.S. home loan demand climbs even as rates surge

By Julie Haviv

NEW YORK (Reuters) - U.S. mortgage applications rose last week, fueled by increased demand for home purchase loans even as interest rates hit their highest level in nearly a year, an industry group's data showed on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchasing and refinancing loans, for the week ended July 6 increased 1.1 percent to 626.2.

The four-week moving average of mortgage applications, which smooths out the volatile weekly figures, was down 1.6 percent at 627.0.

Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.65 percent, up 0.15 percentage point, their highest since the week ended July 21, 2006, when it stood at 6.69 percent.

The rise in demand for loans to buy homes last week offset lower refinancing activity.

The MBA's seasonally adjusted purchase index, widely considered a timely gauge of U.S. home sales, rose 3.8 percent to 453.9. The index was above its reading a year earlier at 425.0.

The group's seasonally adjusted index of refinancing applications decreased 3.0 percent to 1,636.9, its lowest since December 2006.

The refinance share of applications decreased to 36.2 percent from 37.8 percent the previous week.

Fixed 15-year mortgage rates averaged 6.31 percent, up from 6.20 percent.

Rates on one-year adjustable-rate mortgages (ARMs) increased to 5.60 percent from 5.49 percent.

The ARM share of activity decreased to 20.4 percent from 21.0 percent the previous week.

U.S. housing industry indexes, in general, tend to be volatile. Recent data on home sales suggest a delayed recovery for the hard-hit sector.

The MBA's survey covers about 50 percent of all U.S. retail residential loans. Respondents include mortgage banks, commercial banks and thrifts.

For an MBA data table, see ID:nN11266806