Your Economy (No Politics)

[Bullwinkle]

Applications for mortgages decline
Victor Epstein / Bloomberg News
Friday, March 10, 2006


Rising borrowing costs and high home prices result in the fifth loss in six weeks, group reports.

Applications filed with U.S. mortgage lenders for home purchases declined for a fifth week in six, more signs that rising borrowing costs and high prices are putting the brakes on the housing market.

The Mortgage Bankers Association's weekly home-purchase index declined 0.4 percent to 399 from 400.8 in the week ended March 3. An increase in refinancing helped boost the Washington-based group's overall index of mortgage applications by 0.7 percent last week.

The average rate on a 30-year fixed mortgage rose to 6.37 this week. Further increases in borrowing costs may exacerbate a recent slowdown in sales and produce more of a drag on economic growth, economists said.

"The speed with which long-term rates are now rising could intensify the housing slowdown," said Ellen Zentner, an economist at Bank of Tokyo-Mitsubishi UFJ in New York. "In the long-term, it means fewer sales and refinancing and slower consumer spending."

Refinancing has been a source of cash for consumers during the past few years. While the mortgage bankers group's index of refinancing increased by 2.6 percent to 1614.4 last week, it's down 26 percent from a year ago.

The rise last week in refinancing helped the mortgage bankers group's overall index increase to 575.6 last week from 571.5.

Purchase applications have declined by a quarter since reaching a high in June of last year, reinforcing a forecast by the National Association of Realtors that home sales will fall 4.7 percent this year from a record in 2005.

"We see the slowdown crystal clear in the MBA purchase index, and it's starting to show up in monthly sales data," said Anthony Chan, chief economist at JPMorgan Chase & Co.'s private client services group in Columbus, Ohio. "The one thing that was supporting the market, low mortgage rates, is being taken away."

Contracts to buy previously-owned homes fell 1.1 percent in January, a fifth consecutive monthly decline, a National Association of Realtors report showed.

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