Florida Home Loan Applications Increase Again

Home loan applications rose for a third straight week as homeowners with adjustable-rate mortgages continue to take advantage of falling mortgage rates, the Mortgage Bankers Association said in a statement Wednesday.

The group’s seasonally adjusted index of mortgage application activity for the week ending August 18 edged higher by 0.1 percent. After rising throughout the first half of the year, borrowing costs on 30-year fixed-rate Florida mortgages have tumbled for four consecutive weeks, and many believe the trend will continue again this week.

While well above last year’s record lows, mortgage rates are down nearly a third of a percent from the four-year high of 6.86 percent, reached in mid-June. The MBA’s index of Florida home loan refinancing, meanwhile, climbed 1.3 percent to its highest level since March 31. Refinance activity made up 40.6 percent of all mortgages during the week, up from 39.6 percent.

The seasonally adjusted purchase mortgage index declined 1 percent to 382.2 from 385.9, suggesting that housing demand continues to soften.

Some experts warn, however, that upheaval could be around the corner when adjustable-rate mortgages (ARMs) start resetting. The use of adjustable-rate loans ballooned in 2003-2005 when lower short-term borrowing rates offset the risk that their interest rates would rise later on.

About 30 percent of all Florida home loans taken out over the past three years are ARMs, many of which carried fixed-interest rates for three years and are scheduled to reset in by 2007. Nationally, some economists’ estimates for the total dollar value of adjustable-rate mortgages that will reset in 2007 exceed $1 trillion.