Mortgage Rates Rise, But Activity Picks Up Too By Nick Timiraos Wall Street Journal 08-26-09

Mortgage Rates Rise, But Activity Picks Up Too
By Nick Timiraos
The Wall Street Journal
August 26, 2009

Mortgage rates continue to hover in the low 5% range, producing a slight boost in mortgage activity.

Rates on 30-year fixed mortgages rose modestly to 5.24% last week, from 5.15% in the previous week, but still below 5.38% of two weeks ago, according to the Mortgage Bankers Association’s weekly survey of mortgage applications.

The MBA’s refinance index rose by 12.7% last week from the previous week, the third gain in four weeks, and total mortgage application volume is up 34% from the same time last year on an unadjusted basis. While low by historical standards, rates haven’t dropped below the magic 5% threshold that they crossed as recently as May.

The index that measures new mortgage purchases rose by 1% on solid demand for government loans, the fourth straight weekly gain. Refinance activity accounted for 56.5% of all mortgage applications.

Meanwhile, more borrowers appear to be turning to adjustable-rate mortgages. ARMs accounted for 6.5% of all mortgage originations last week, up from lows of 3% when mortgage rates dropped below 5% in April and May.