"NEW YORK, Nov 9 (Reuters) - U.S. mortgage applications increased last week, driven by a brisk rise in demand for loans to purchase homes even as interest rates rose to 16-month highs, an industry group's figures showed on Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity for the week ended Nov. 4 increased 2.3 percent to 661.3.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.31 percent last week, up 0.10 percentage point from the previous week's 6.21 percent. It was was highest level since the week ended June 11, 2004 when the rate reached 6.34 percent.
The fixed 30-year mortgage rate, widely considered the industry benchmark, has climbed 0.84 of a percentage point since late June, when it stood at its lowest level for 2005 at 5.47 percent, according to MBA data.
The MBA's purchase mortgage index, regarded as a timely gauge of U.S. home sales, rose 6.4 percent last week to 465.7.
Even though the purchase index rose for the first time in three weeks, home purchase applications remain 3.6 percent below their-year ago level, Jay Brinkmann, MBA's vice president of research and economics, said in a statement accompanying the data. MBA data shows that the 30-year-rate stood at 5.69 percent one year ago.
The group's index of refinancing applications dropped 3.4 percent to 1,798.8. its third consecutive weekly decline.
Home refinances are dropping as interest rates continue to rise. Mortgage applications are up. Why? Perhaps it is because of the post Katrina effect and also some people are worried about rising rates so they are deciding to take a mortgage out now. Or the boom is starting all over again? Nope.