NEW YORK, Oct 1 - Total applications for mortgage loans in the United State rose slightly last week on a decline in mortgage rates that prompted homeowners to refinance their home loans, according to an industry survey. "With the easing in mortgage rates in the last few weeks we saw a little bit of a pickup in refinance applications," said Frank Nothaft, chief economist at Freddie Mac. The Mortgage Bankers Association said on Wednesday its seasonally adjusted gauge of overall mortgage requests rose to 707.2 in the week ended Sept. 26, up 1.1 percent from the previous week's 699.6.
The group's index of demand for loans to buy homes fell 1.1 percent to 397.8 from the previous week's 402.1 level, but was still 10.7 percent above the level a year ago. Applications for home loan refinancings as measured by the group's refinancing index rose 3.2 percent to 2,506.8 while rates for the most commonly used home loan, the 30-year mortgage, fell 18 basis points to 5.67 percent. The steady sales activity in home sales bodes well for the economy because home buying encourages spending on goods and services. "In the first year after a home purchase, on average, buyers spend $5,000 more than people who stay in their home," said Jay Brinkmann, economist at the Mortgage Bankers Association. "This extra spending is an important economic stimulus, much more so than a straight rate refinance." Refinancings, too, encourage economic activity because they allow home owners draw cash out of their homes and use it to pay down debt like credit cards or auto loans and pay for home improvements. Lower rates may cheer up consumers whose confidence has been battered by a poor job market. On Tuesday, that confidence as measured by the Conference Board fell to 76.8 in September from a revised 81.7 in August. "This (low mortgage rates) certainly helps the families' financial positions. If they choose to refinance they are reducing monthly payments. And if they are refinancing to convert home equity into cash it provides additional purchasing power," said Nothaft. Looking ahead, demand for refinancings likely will be lively if rates remain low or plummet further. "We are going to have a pickup in refinancings. There are people who missed the opportunity to refinance at the lows (in rates)," said Art Frank, mortgage analyst at Nomura Securities International Inc.///