Your Economy (No Politics)

[Bullwinkle]

MBA: U.S. demand for home loans slips
March 15, 2006: 7:40 AM EST


Industry group's index shows a 0.2% decrease, citing multiyear highs on 30-year rates; refinancing applications also dip.

NEW YORK (Reuters) - U.S. mortgage applications fell last week, reflecting lower demand for home refinancing, as interest rates on long-term loans surged to a near four-year high, an industry trade group said Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity for the week ended March 10 decreased 0.2 percent to 574.4 from the previous week's 575.6.

Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.42 percent, up 0.11 of a percentage point from the previous week, its highest level since the week ended July 5, 2002, when it reached 6.46 percent.

"Seasonal factors are rising and we are entering the peak home buying season of spring, which is probably why higher rates did not have a larger impact on loan demand," said Douglas Duncan, chief economist at the MBA.

The 30-year fixed-rate mortgage, the industry benchmark, was also substantially above its 2005 low of 5.47 percent in late June of 2005 as well as last year's high of 6.33 percent in the week of Nov. 11.

The group's seasonally adjusted index of refinancing applications decreased 1.9 percent to 1,583.6 compared to 1,614.4 the previous week. A year earlier the index stood at 2,267.5.

The MBA's seasonally adjusted purchase mortgage index rose 1 percent to 403 from the previous week's 399. The index, considered a timely gauge of U.S. home sales, was below its year-ago level of 462.8.

Historically low mortgage rates have fueled a five-year housing boom, helping support the U.S. economy's recovery from recession despite uncertain business investment.

Higher interest rates may have finally cooled the U.S. housing sector, but the MBA's Duncan is not expecting a crash.

"What we are seeing is an orderly slowing of the marketplace," he said.

Fixed 15-year mortgage rates averaged 6.06 percent, up from 5.97 the previous week. Rates on one-year adjustable-rate mortgages (ARMs) decreased to 5.64 percent from 5.69.

The MBA's survey covers about 50 percent of all U.S. retail residential mortgage originations. Respondents include mortgage bankers, commercial banks and thrifts.

http://money.cnn.com/2006/03/15/real_estate/mortgage_applications.reut/index.htm?section=money_lates...