Mortgage applications in the United States rose this week as home loan interest rates remained at record lows, according to the Mortgage Banking Association's (MBA) weekly applications report.
The MBA's market Composite Index, a measure that gauges mortgage activity and application volume across the country, was up 0.2 percent in the week ended August 29, 2014.
The refinancing index was up one percent from a week ago, but new purchase applications dipped two percent this week. The refinancing applications accounted for 57 percent of all the mortgages applied, the highest since March 2014.
The small spike in mortgage applications rose as mortgage rates still remain at record lows. According to Freddie Mac's weekly home loan interest rates survey, last week's rates remained largely unchanged from the previous week's.
"There was an almost 12 percent jump in refinance applications for government loans, led by an 18 percent increase in FHA refinance applications," Michael Fratantoni, chief economist of MBA, told CNBC. "The increase likely reflected an effort by some lenders to reinvigorate their FHA refinance programs."
The average 30-year-fixed mortgage rates went down to 4.10 percent, the same as last week's. The rate was 4.51 percent at the same time, last year.
The average 15-year-fixed mortgage rates went up to 3.25 percent from last week's 3.23 percent. It averaged 3.54 percent at the same time, last year.
The five-year treasury-indexed hybrid adjustable mortgage rate spiked slightly to 2.97 percent from last week's 2.95 percent. The rate was 3.24 percent a year ago.
The average one-year treasury-indexed adjustable mortgage rate continued its upward trend increasing to 2.39 percent from last week's 2.38 percent. The rates averaged 2.64 percent at the same time, last year.
While the mortgage scenario may look all rosy right now, analysts expect a crisis soon. As the Federal Reserve cuts back on its bond-buying scheme and the two large mortgage-backed security sellers Freddie Mac and Fannie Mae nearing an overhaul decision, the mortgage market could get "dicey", according to a report by analyst Dick Bove.
Reflecting on the upcoming changes, Bove said:
"This means there will be less money available to fund housing, and the terms of the available funds will be considerably more onerous than what was available under 30-year, fixed-rate loans. This means higher monthly payments and lower housing prices. It means a crisis in the mortgage markets-and the economy."
Others are urging home buyers to take advantage of the low rates currently prevailing in the market, but lending standards still remain pretty tight.
"Those who can qualify for credit and expect rates to increase will jump in, but the biggest hurdle to homeownership is getting credit and standards are still very tight," Anika Khan, a senior economist at Wells Fargo Securities, told Bloomberg.
