By Richard Leong
NEW YORK (Reuters) - A gauge of U.S. mortgage demand to buy a home climbed to its strongest level over 1-1/2 years last week even as most mortgage rates edged higher, according to Mortgage Bankers Association data released on Wednesday.
The recent pickup in mortgage application activity for home purchase reinforced the view of underlying strength in the housing sector. An improving labor market and steady wage gains have offset the rise in interest rates since Donald Trump's U.S. presidential win in November and tight inventories nationwide, analysts said.
The Washington-based industry group said its index of mortgage applications to buy a home, a proxy for future home sales, increased 1.7 percent on a seasonally adjusted basis to 250.3 points in the week ended May 5.
This was the highest level for this measure since 257.4 in the week of Oct. 2, 2015, MBA data showed.
"Home sales should be picking up as we are seeing with the purchase mortgage applications. We are going to see both new and existing home sales trending higher in the coming months," said David Berson, chief economist at Nationwide Mutual Insurance Co. in Columbus, Ohio.
Interest rates on conforming 30-year fixed-rate mortgages were unchanged at 4.23 percent last week, while average mortgage rates on other types of 30-year loans MBA track were 0.03 percentage point to 0.04 percentage point higher than the prior week.
Conforming loans are those with balances of $424,100 or less which qualify for guarantees from federal mortgage agencies Fannie Mae (PK:FNMA) and Freddie Mac (PK:FMCC).
MBA said its seasonally adjusted index on conforming loan activity to buy a home rose to 316.9, which was the highest since April 2009.
Thirty-year mortgage rates rose in step with higher Treasury yield last week.
Meanwhile, MBA's seasonally adjusted gauge of applications to refinance an existing home loan rose 3.3 percent to 1,345.5.
Increases in weekly purchase and refinancing application volumes lifted MBA's seasonally adjusted index on overall mortgage activity to 415.7 points, the strongest level in eight weeks.