Mortgage Applications Hit Two-Month High

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With interest rates falling, the number of mortgage applications rose last week to its highest level in two months, the Mortgage Bankers Association reported Wednesday.

The number of mortgage applications gained 7.3 percent on a seasonally adjusted basis in the week ended March 2 compared with the previous week. Application volumes last week rose about 16 percent from the same week a year ago, the MBA said.

The number of applications for loans to buy homes rose 1 percent on a week-to-week basis and about 2 percent from a year ago. Purchase loans have been relatively flat for six weeks, the MBA's data showed.

But foreclosure rates are also rising, notes CBS News correspondent Anthony Mason. Rates for so-called subprime loans — higher-risk loans made to low-income borrowers — have hit record levels. More than two million subprime loans have or are expected to fail, and that has driven more than 20 lenders out of business.

Meanwhile, applications for loans to refinance existing mortgages increased 15 percent to the highest level seen in 12 weeks from the week ended Feb. 23. Refinancing loans were up about 38 percent compared with this time last year.

Refinancings accounted for 46.1 percent of total applications filed last week after falling to a five-month low of 43.2 percent the week before.

The MBA's index covers about half of all mortgages in the United States. The mortgage bankers typically cater to more qualified borrowers.

Banks have tightened their lending standards, rejecting more loans lately. It's possible that mortgage approvals could be flat or falling even with an increase in applications coming in the door.

Weekly mortgage rates as tracked by the MBA fell sharply.

The average rate for 30-year fixed-rate loans dropped to 6.04 percent — the lowest rate in 11 weeks — from the prior week's 6.16 percent. The rate for 15-year fixed-rate loans averaged 5.73 percent — the lowest in 13 weeks — down from 5.84 percent.

One-year adjustable-rate mortgages, or ARMs, averaged 5.79 percent, hitting an eight-week low and down from a 17-week high of 5.92 percent the week before. ARMs accounted for 21.4 percent of all loan applications, up slightly from 21.1 percent.