A measure of U.S. mortgage applications rose last week as a drop in borrowing costs helped lure homebuyers. Refinancing declined for the sixth week in the past seven.
The Mortgage Bankers Association said its gauge of loan demand increased 0.1 percent to 601.2. The purchase index rose 1.1 percent last week to 454.5 and remains close to the record 501.6 reached in January.
The creation of 1.2 million jobs so far this year, income growth and 30-year fixed-mortgage rates about 1.2 percentage points from a record low have underpinned home sales. The National Association of Realtors said last month that its first-quarter index of homebuyer affordability was the second highest since recordkeeping began in 1986.
"Housing demand has remained extremely robust," said Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Conn. "With mortgage rates unlikely to decline significantly going forward, refinancing activity will probably continue to trend downward this summer."
While the gauge of home purchases has declined 9.4 percent from a high reached in January, applications to refinance have plunged 85.4 percent from a record level in May of last year.
The mortgage bankers group's index of refinancing fell 1.7 percent to 1,454.6 last week. Refinancing last year was a source of cash for consumers and helped underpin the economy.
Federal Reserve policymakers will meet this week and economists forecast a quarter-point increase in the overnight bank lending rate, according to a Bloomberg survey.
"We know rates are too low and they have to get up above inflation," said Fed Governor Susan Bies, speaking to reporters last week after an address to the Financial Managers Society and Accounting Forum for Financial Institutions in Washington.