U.S. loan applications to buy homes rise

U.S. applications for mortgage loans to buy homes rose while refinancings trickled lower last week, an industry trade group said on Wednesday.

The Mortgage Bankers Association on Wednesday said its purchase index, a measure of demand for loans to buy homes, rose 2.2 percent to 459.8 in the week ended May 28.

The MBA's refinancing index, a gauge of requests for mortgage loan refinancings, fell by 6.6 percent to 1,583.6 from 1694.9 in the prior week.

Average interest rates on 30-year mortgages fell 2 basis points to 6.24 percent, the MBA said.

The MBA's market index, a measure of overall lending activity, fell 1.2 percent to 624.6 from 632.4 in the prior week.

The strength in demand for loans to buy homes comes as demand for refinancings ebbs, occasioning little surprise for market participants, who have expected a rush to purchase before mortgage rate rise higher.

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"There is some sense home sales are holding up because people are trying to beat the Fed - get into a house and lock in a mortgage rate before the Fed hikes rates," said Chris Low, chief economist at FTN Financial Inc. on Tuesday before the report was released.

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Expectations of higher interest rates have hung over the market in recent weeks, especially after a strong April employment report.

Last week, Federal Reserve Board Governor Ben Bernanke pointed out that "an alternative to gradual policy adjustment is what an engineer might call a bang-bang solution, or what I will refer to today as the 'cold turkey' approach."