Applications for U.S. home mortgages dropped to their slowest pace since December 2000 as loan rates hovering near one-year highs compounded the housing market’s woes, according to data from an industry group on Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity declined 14.1 percent to 420.8 in the week ended July 25. The decline was the most severe move in percentage terms since May.
The MBA’s seasonally adjusted index of refinancing applications plunged 22.9 percent to 1,074.4 last week. The MBA’s gauge of loan requests for home purchases fell 7.8 percent to 309.5.
Fixed 30-year mortgage rates averaged 6.46 percent in the week, compared with a one year-high of 6.59 percent in the prior week, the MBA said.
While concerns of faster inflation have boosted the market rates that influence mortgages, the credit crisis has hurt banks’ ability to support the market for mortgage-backed securities, applying upward pressure to the rates that lenders charge to consumers.
A slowing rate of applications suggests potential homebuyers may be expecting better deals in the future as rising foreclosures and a softening economy nudge home prices lower.
Prices of U.S. single-family homes measured in 20 major metropolitan areas have dropped about 16 percent in the past year, with few signs of recovery, according to S&P/Case Shiller Home Price Index on Tuesday.
Sales of existing homes in June also dropped to their slowest pace in 10 years, the National Association of Realtors said last week.
