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Mortgage applications at 3-year high

WASHINGTON -- Mortgage applications in the United States climbed last week to the highest level in more than three years as borrowing costs dropped to a record low.

The Mortgage Bankers Association’s index jumped 16.6 percent in the period ended Sept. 28 from the prior week to reach the highest point since April 2009, the MBA said Wednesday.

Purchase applications rose 3.9 percent and refinancing surged 19.6 percent.

A drop in interest rates, fueled in part by the Federal Reserve’s third round of so-called quantitative easing of monetary policy, is helping drive a recovery in residential real estate.

While builders such as Lennar Corp. (NYSE: LEN) are benefiting from the housing pickup, stable property values are allowing some homeowners to refinance at lower interest rates, giving them extra cash to spend or save.

“This is obviously a positive byproduct of this set of QE policies,” said Yelena Shulyatyeva, a U.S. economist at BNP Paribas in New York. “When you see your assets are going up in value, you will probably be more prone to spend a little but more.”

Borrowing costs have dropped since the Fed last month announced it would buy $40 billion of mortgage-backed securities a month to help stimulate the economy.

Since the conclusion of the central bank’s two-day meeting on Sept. 13, the average rate on a 30-year fixed mortgage has dropped about 20 basis points, or 0.2 percentage point.

Lower rates

The average rate fell to 3.53 percent, an all-time low in the series dating back to 1990, from 3.63 percent the prior week, Wednesday’s data showed. Borrowing costs on a 15-year fixed mortgage decreased to 2.90 percent from 2.98 percent.

The share of applicants seeking to refinance a loan rose to 83.3 percent, the most since January 2009, from 81.2 percent the previous week.

Low interest rates are also spurring mortgage prepayments, which have soared to the highest level in seven years.

Home loans were repaid in August at a pace that would erase 25 percent of the debt in a year, according to Lender Processing Services Inc., a Jacksonville, Fla.-based data provider that tracks 40 million mortgages.

Lennar, the third-largest builder by revenue, said on Sept. 24 that its quarterly profit more than quadrupled from a year earlier.

“The homebuilding business is beginning to revert to normal, and that’s positive for the U.S. economy in general, which is in turn good for a sustained recovery in the housing market,” Stuart Miller, chief executive officer at Lennar, said. “Overall demand has been improving and we’ve seen a consistent sales pace at improving prices.”

Higher prices

Home prices climbed more than forecast in July from a year earlier, according to S&P/Case-Shiller. The group’s index of property values in 20 cities increased 1.2 percent from July 2011, the biggest 12-month advance since August 2010.

Purchases of existing houses increased 7.8 percent in August to a 4.82 million annual rate, the most since May 2010, the National Association of Realtors said on Sept. 19.

Construction of single-family houses climbed 5.5 percent to a 535,000 rate in August. Permits for the building of one-family homes rose 0.2 percent to a 512,000 annual pace, the highest since March 2010, according to a Commerce Department report last month.

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