Sep. 4--Falling interest rates are fueling a rise in home mortgage applications and refinancings in the Inland region, though experts aren't yet ready to declare the beleaguered local housing market on the road to full recovery.

Virginia-based Freddie Mac, a government-backed corporation that provides mortgage capital to lenders, released a study Thursday showing 30-year fixed-rate mortgages averaging 5.08 percent, down from 5.14 percent a week ago and 6.35 percent a year ago.

"Bond yields pushed mortgage rates slightly lower this week," Freddie Mac chief economist Frank Nothaft said in a statement. "Low mortgage rates are helping to keep housing very affordable."

According to the National Association of Realtors' housing affordability index, seven of the top eight most affordable months occurred during this year. Pending sales of existing homes rose for the sixth straight month in July, the association reported.

A Thursday check of Bankrate.com, which tracks lending trends, showed Inland rates for a 30-year fixed mortgage ranging from 4.5 to 5.75 percent. Rates assume a 20 percent down payment, and lenders are maintaining strict credit standards, according to Bankrate.

Bankrate this week released a study indicating closing costs on home purchases have recently dropped to 2007 levels, another reflection of pricing shifts in the national housing market.

At Provident Bank Mortgage, a division of Riverside-headquartered Provident Savings Bank, President Rich Gale said the company is making 30-year fixed loans in the range of 4.78 to 5 percent, down from a month ago and still low by historical standards.

Gale said Provident's new-purchase home loan volume has been steadily rising during the last six months, and most recently, dropping interest rates have sent refinancings upward.

"Refinancings are like an accordion -- when the rates go down, the refi's go way up," he said.

By the end of September, if mortgage rates keep trending down, Gale said refinancings could comprise about half of the company's total home loan volume.

Affordability is driving the local spike in applications. Gale said a large portion of the new applications are for lower-priced homes being bought out of bank foreclosure, and many of those homes are getting multiple purchase offers.

Gale said it will be premature to declare the Inland housing market fully on the mend until there are more trade-up purchases of homes in the middle and upper price ranges.

"Until we start to see more people selling their homes to move up to another place, we really can't say that the overall housing market is getting healthier," he said.

In the Inland region, relatively low prices are combining with low interest rates to boost sales.

In July, Riverside County had 4,699 home sales, up more than 14 percent from July 2008 and the highest sales for any month since September 2006, according to DataQuick.

In the same month, 3,549 homes sold in San Bernardino County, an increase of almost 41 percent from a year earlier and the highest monthly sales since August 2006.

According to DataQuick, sales have increased year-over-year for 16 consecutive months in Riverside County and 14 consecutive months in San Bernardino County.

Data for August has not yet been released.

Reach Lou Hirsh at 951-368-9559 or lhirsh@PE.com

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