April 21 (Bloomberg) -- Mortgage applications in the U.S. rose by the most in seven weeks as the looming end of the homebuyer tax credit helped spark the biggest rise in purchases since January. The Mortgage Bankers Association’s index increased 13.6 percent in the week ended April 16. The Washington-based group’s gauge of purchases climbed 10.1 percent and a drop in mortgage rates boosted the refinancing measure by 15.8 percent, the first gain since the end of February.
The tax credit, which requires contracts to be signed by the end of the month, is bringing buyers back to the market. Reports this week on March sales of new and previously owned homes may add to evidence that housing has stabilized, even as 9.7 percent unemployment and mounting foreclosures limit gains.
“We expect the improvement in sales to continue through the spring, peaking in June when the tax credit expires for closed contracts,” Michelle Meyer, a senior economist at Barclays Capital Inc. in New York, said in a note to clients.
The average rate on a 30-year fixed loan dropped to 5.04 percent from 5.17 percent the prior week, the group said.
At the current 30-year rate, monthly payments for each $100,000 of a loan would be $539, up from $520 a year ago, when the rate was 4.72 percent.
The average rate on a 15-year fixed mortgage declined to 4.34 percent last week from 4.45 percent the previous week. The rate on a one-year adjustable mortgage decreased to 6.95 percent from 7.02 percent.
As borrowing costs dropped, the share of applicants seeking to refinance a loan rose to 60 percent last week from 58.9 percent.
Home Sales
Sales of previously owned homes rose 5.3 percent in March from the prior month, according to the median forecast of economists in a Bloomberg News survey ahead of a National Association of Realtors report tomorrow.
An April 23 report from the Commerce Department may show purchases of new houses increased 5.5 percent, according to the survey median.
The figures show the extension of the credit for first-time buyers and its expansion to include some current owners is beginning to stoke demand. At the same time, the real estate market faces hurdles, including rising foreclosures.
Lenders repossessed or delivered a default or auction notice to 932,234 homes, or one out of every 138 households, during the first quarter, according to RealtyTrac Inc. That marked a 16 percent increase from a year earlier.
