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Mortgage applications decrease last week-MBA

*A decrease, even among lower rates, hmmm...

Mortgage applications decrease last week-MBA
Wednesday June 1, 7:42 am ET

NEW YORK (Reuters) - Applications for U.S. home mortgages fell last week due to decreasing purchasing and refinancing activity even as mortgage rates eased, an industry group said on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity decreased 2.8 percent to 709.1, partially offsetting the previous week's 4.3 percent gain.

The MBA's seasonally adjusted index of refinancing applications dropped 1.2 percent to 2142.1, after rising 6.4 percent the prior week.

The MBA's purchase index, a gauge of loan requests for home purchases, fell 4.1 percent to 462.7, after climbing 2.8 percent the previous week.

According to the MBA, fixed 30-year mortgage rates averaged 5.61 percent last week, excluding fees, down 2 basis points from 5.63 percent the previous week. Rates are lower than early April, when the fixed 30-year mortgage was at 5.91 percent.

Interest rates also are much lower than a year ago. The fixed 30-year mortgage rate as of May 28, 2004 was 6.24 percent, according to MBA data.

The average contract interest rate for 15-year fixed-rate mortgages also fell last week, down 11 basis points to 5.13 percent from 5.24 percent a week earlier.

Rates on one-year adjustable-rate mortgages, or ARMs, fell to 4.09 percent from 4.21 percent the prior week.

The decrease in ARM rates last week, however, did not appear to impact demand for these loans. Applications for ARMs fell to 33.3 percent of total applications from 34.8 percent the previous week, the MBA said.

Refinancings, however, increased as a percentage of all mortgage applications, at 41.2 percent of total applications, from 40.3 percent the previous week.

Low mortgage rates have supported the housing sector, generating economic growth in recent years. Industry analysts and economists have said they expect home sales to edge off the record 2004 levels as the Federal Reserve raises rates. But, despite last week's drop in mortgage applications, there has been little sign that demand has weakened.

Recent data on the U.S. housing sector showed that the market is still red hot. Sales of both new and existing homes reached new records in April, according to separate data from the Commerce Department and National Association of Realtors last week.

The MBA's survey covers approximately 50 percent of all U.S. retail residential mortgage originations. It has been conducted weekly since 1990.

Respondents include mortgage bankers, commercial banks and thrifts.


LINK: http://biz.yahoo.com/rb/050601/economy_mortgages.html?.v=2