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U.S. MBA's Mortgage Applications Index Fell 5.5% Last Week
Courtney Schlisserman in Washington


April 12 (Bloomberg) -- A measure of U.S. mortgage applications fell last week as higher borrowing costs deterred homebuyers and made refinancing less attractive.

The Mortgage Bankers Association's index of applications to buy a home or refinance an existing mortgage declined 5.5 percent to 579.4 from 612.8 a week earlier. The gauge of applications to purchase homes dropped 4.7 percent to 417.7.

Higher mortgage rates and a decline in speculative purchases may cause home sales to fall this year for the first time since 2000, said Anthony Chan, chief economist at JPMorgan Chase & Co.'s private client services group in Columbus, Ohio.

``The housing market is clearly slowing down,'' Chan said before the report. ``Now that the mortgage rates are going up, you may see people getting really, really scared.''

Last week's 6.5 percent average rate on a 30-year fixed mortgage was the highest in almost four years, according to today's release. Average rates on 15-year fixed and one-year adjustable mortgages rose as well.

The mortgage banker's refinancing index fell 6.6 percent to 1532.4, the second-lowest level this year, from 1640.8 the week earlier. Refinancing's share of loan applications fell to 36 percent last week, from 36.6 percent the week before.

The prior week's overall index was the highest since the week ended Feb. 3 and suggested to some that buyers were jumping into the market because of concern that mortgage rates would become even higher, economists said. Last week's average 30-year rate was the highest since June 14, 2002, when it was 6.53 percent.

At the current rate, monthly interest and principal costs for every $100,000 of a loan would be $632.07. A year ago, when the rate was 5.95 percent, the cost was $596.34.

Adjustable Rates Rise

The average rate on a 15-year fixed mortgage rose to 6.17 percent from 6.15 percent. The one-year adjustable mortgage was 5.97 percent, up from 5.96 percent a week earlier.

Home sales will fall 8 percent this year, Freddie Mac said on April 10. The second-largest U.S. mortgage company expects prices to rise 8.7 percent in 2006, less than the 13 percent increase last year, and forecasts 30-year fixed mortgages to average 6.4 percent.

``It is very likely that housing starts and permits will be basically flat, maybe down some,'' Federal Reserve Bank of St. Louis President William Poole said in an interview on April 7. Still, ``there's a lot of evidence of strengthening in the nonresidential part of investment,'' which will make up for the weakness in housing, he said.

Economic Growth

The economy probably will expand at a 3.4 percent average rate this year, according to a survey of economists taken by Bloomberg News from April 3 to April 7. Growth is expected to cool by the end of the year partly because of the decline in housing.

D.R. Horton Inc., the largest U.S. homebuilder, said yesterday that orders rose 9.5 percent in its fiscal second quarter, one third the pace of a year earlier, as it lowered prices to sell properties.

The Mortgage Bankers Association's survey covers about half of all U.S. retail residential mortgage originations and has been compiled every week since 1990.

http://www.bloomberg.com/apps/news?pid=10000103&sid=awS3MY41RqGo