U.S. mortgage applications fell last week to their lowest since early April as interest rates on home loans climbed to 16-month highs, an industry trade group said Wednesday.
The Mortgage Bankers Association said its index of mortgage application volume for the week ended Oct. 28 declined 4.8 percent to 646.7, the lowest since the start of April, when the index was at 644.5. The index is down from the previous week’s 679.1.
Loan demand has been declining since early summer on rising mortgage interest rates, but U.S. home sales are still poised for a record 2005, analysts say.
Nevertheless, many economists say higher rates may have finally cooled the U.S. housing sector amid evidence of slower appreciation and growing inventory in recent months.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.21 percent last week, up from the previous week’s 6.06 percent and 5.65 percent a year earlier.
The average 30-year rate was the highest since June 2004, when the rate hit 6.34 percent.
“With 30-year fixed mortgage rates remaining above 6 percent and rising, both new purchase and refinancing activity are crumbling,” said Steven Wood, chief economist at Insight Economics.
Home purchase loans drop
The Mortgage Bankers Association’s purchase mortgage index, considered a timely gauge on U.S. home sales, fell 6.2 percent to 437.6 from the previous week’s 466.4. The seasonally adjusted gauge was 7.6 percent lower since last month.
“This decline is consistent with our expectations of a softening from the record level of new home sales during the first three quarters of 2005,” said Doug Duncan, MBA’s chief economist.
The purchase index posted a record high of 529.3 for the week ended June 10.
According to the National Association of Realtors, sales of existing homes would increase 4.8 percent from 2004 to 7.11 million units, while new home sales would climb 8 percent to 1.30 million units.
Existing home sales would fall 3.5 percent and new home sales would decline 4.5 percent in 2006, which would still be the second-biggest year for home sales, the Realtors said.
The MBA’s refinancing applications index was down 2.8 percent to 1,862.8 from 1,916.8 in the previous week and off 19.1 percent from 2,303.9 a year earlier.
The survey covers about 50 percent of all U.S. retail residential mortgage originations. Respondents include mortgage bankers, commercial banks and thrifts.
