A new survey by the Mortgage Bankers Association found that the rate of mortgage applications increased for the week ending October 21.
The Market Composite Index, which measures mortgage loan application volume, rose 4.9 percent on a seasonally adjusted basis from the prior week, which included the Columbus Day holiday. Mortgage refinance activity also increased from the previous week as the Refinance Index showed a 4.4 percent change. Refinancing still made up the bulk of most of the mortgage application activity. The rate decreased to 77.3 percent of total applications, a modest decline from 77.6 percent the week before.
"This change was led by an increase in the Mountain region," the MBA wrote in the report. "In addition, the share of purchase mortgages for second homes decreased to 5.8 percent in September from 6 percent in August."
Mortgage applications on adjustable-rate mortgages rose to 5.9 percent from 5.8 the week earlier. Meanwhile, investors accounted for 6 percent of all mortgage application activity in September, an increase from 5.7 percent recorded in August.
The average rate for a 30-year fixed-rate mortgage with a loan balance of $417,500 or less remained static at 4.33 percent, while the average 30-year FRM rate on a jumbo loan edged higher to 4.68 percent from 4.64 percent.
This climb in mortgage rate applications could lead to higher home sales. A report from the Commerce Department shows how September saw a 5.7 percent monthly hike in home sales.
The report stated that last month, the seasonally adjusted rate of new homes sold rose to 313,000, up from 296,000 the month prior. Previous forecasts only expected new homes sales to reach 302,000 for the month.
The median sales price of these new homes sold was $204,400, while the average sales price fell to $243,900, the lowest level since early 2009.
Regionally, the South led new-home sales with a gain of 11.2 percent, with the West following closely behind with an increase of 9.7 percent. Meanwhile, the Northeast saw a fall of 4.2 percent in sales, while the Midwest registered a 12.2 percent decline.
The National Association of Home Builders released a statement supporting the improving relationship between lenders and qualifying borrowers for larger mortgages.
"Today's report highlights the gradual improvement in housing market conditions that is becoming evident in certain pockets of the country, as consumers who can surmount very restrictive lending standards to qualify for a favorable mortgage rate seize on this opportunity to buy," said Bob Nielsen, chairman of NAHB.
First-time buyers are continuing to drive the housing market. This can be seen by an increase in lower-priced, entry-level homes under contract. It's important to note that these consumers are heavily dependent on government policies and programs that support homeownership, said Nielson.
To further drive increases in home sales and mortgage activity, President Barack Obama and his administration outlined changes to government financing regulations to make the process easier and stimulate the housing market.
The Federal Housing Finance Agency will allow more homeowners to refinance underwater mortgages through the Home Affordable Refinance Program. In a trip to Nevada, President Obama also revealed a plan to put construction workers back to work as a stepping stone in improve the housing market.
"Project Rebuild connects the two by helping the private sector put construction workers to work rehabilitating vacant or abandoned homes and businesses all across the country. That will help stabilize home prices in communities like this one," the president said in a speech in Las Vegas.
