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Weekly mortgage applications decline

Weekly mortgage applications decline
Industry group cites a sharp drop in U.S. refinancing activity
Reuters
Updated: 8:40 a.m. ET July 27, 2005

NEW YORK - Applications for U.S. home mortgages decreased last week, pulled lower by a sharp decline in refinancing activity, despite steady long-term interest rates, an industry group said on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity fell 5.8 percent to 754.3 in the week ending July 22, more than offsetting the previous week’s 1.2 gain.

On a four-week moving average, the index — which is a measure of mortgage loan application volume — is down 1.3 percent to 795.8 from 806.2.

The MBA’s seasonally adjusted index of refinancing applications dropped 11.4 percent to 2,320.3 after rising 2.5 percent the prior week.

The MBA’s purchase index, a gauge of loan requests for home purchases, declined 0.7 percent to 485.1, its third straight weekly drop. It fell 0.1 percent in the week ending July 15, following a 6.1 percent drop in the first week of the month.

Fixed 30-year mortgage rates averaged 5.72 percent last week, excluding fees, unchanged from the previous week, but up 25 basis points, equal to one-quarter of a percentage point, from the week ending June 24, when the 30-year rate hit its lowest level in 2005, MBA data showed.

Most industry analysts believe interest rates are still at levels that entice consumers, pointing to data showing the market remains robust with little sign of easing.

The 30-year mortgage rate is still lower than its 2005 peak of 6.08 percent hit at the end of March, according to MBA figures. That 30-year rate, which is a benchmark for the mortgage industry, stood at 5.97 percent during the week ending July 23, 2004.

Despite comparatively low interest rates, U.S. consumers lost their appetite for home refinancing last week.

Last week’s 11.4 percent drop in the refinancing index was its sharpest fall in six weeks. In the week ending June 17, the refinance index fell 13.2 percent.

Refinancings last week also decreased as a percentage of all mortgage applications, at 42.9 percent, down from 45.7 percent the previous week.

ARM demand increases

After registering the lowest level of demand in over a year in early July, demand for adjustable-rate mortgages (ARMs) has been steadily climbing over the past two weeks, the MBA said.

The ARM share of activity stood at 29.4 percent of total applications last week, up from 28.5 percent the previous week.

The increase in ARM applications came despite higher rates on one-year ARMs, which rose to 4.70 percent from 4.63 percent the prior week.

ARMs’ low initial payments allow borrowers to buy homes that they would not necessarily afford with a fixed-rate loan.

The MBA also said the average contract interest rate for 15-year fixed-rate mortgages rose 4 basis points last week, to 5.32 percent from 5.28 percent a week earlier.

Low mortgage rates have buoyed the housing sector for more than four years. Long-term rates have remained low even though the Federal Reserve has raised its target for short-term interest rates nine times since June 2004.

Indeed, recent data suggests that the housing market is still red hot.

Sales of existing U.S. homes rose 2.7 percent in June to a record pace as home prices soared 14.7 percent from a year ago, the biggest jump in nearly 25 years, the National Association of Realtors said on Monday.

Sales of these previously owned homes surged to a seasonally adjusted 7.33 million unit annual rate last month from May’s upwardly revised 7.14 million unit clip, the trade group said.

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://msnbc.msn.com/id/8725290/