U.S. MBA's Mortgage Applications Index Fell 7.9% Last Week
Oct. 26 (Bloomberg) -- U.S. mortgage applications fell last week to the lowest level since April, reflecting fewer home purchases and less refinancing, a private group's survey showed today.
The Mortgage Bankers Association's index of applications declined 7.9 percent to 679.1, the fourth decline in the last five weeks, from 737.5. The Washington-based group's measure of home purchases dropped 7.4 percent, the biggest decline since June, and mortgage refinancing fell 8.5 percent.
The average rate on a 30-year mortgage held above 6 percent for a second straight week. Higher borrowing costs are forecast to slow housing in 2006 after a record this year, according to the National Association of Realtors.
''Home buying has stabilized in the last three months, as interest rates have moved up,'' said Wesley Beal, chief U.S. economist at IDEAglobal.com in New York. ''Most of the people who could have benefited from refinancing have already done so, so that has slowed to a trickle.''
The average 30-year fixed mortgage fell to 6.06 percent from 6.09 percent, its first decline since the week ended Sept. 9, according to the mortgage bankers group. The rate compares with 5.54 percent a year ago and a four-decade low of 4.99 percent reached in June 2003.
The purchase index fell to 466.4 last week from 503.9, while the refinance index decreased to 1916.8 from 2095.7 in the prior week. Refinancing accounted for 42.5 percent of all mortgage applications, compared with 42.8 percent the prior week and 45.6 percent a year ago.
Adjustable Rates
Adjustable-rate mortgages claimed a larger share last week, rising to 29.5 percent from 29.3 percent. Interest-only loans, which generally carry adjustable rates, grew to 23 percent of new mortgages in the first half of the year from 17 percent a year ago, as home buyers seek new ways of make home purchases affordable, according to a separate report by the bankers group today.
''Borrowers taking interest-only mortgages will decrease their payment by 20 percent versus a fixed-rate mortgage,'' said Bob Moulton, president of the Americana Mortgage Group, in an interview in New York.
The average 15-year fixed mortgage rate fell to 5.57 percent from 5.62 percent, the mortgage bankers said. The average one-year adjustable mortgage rate increased to 5.37 percent, the highest since December 2001.
At the current 30-year fixed rate of 6.06 percent, borrowing costs for each $100,000 of a loan would be $603.41 a month. That compares with $536.21 when the rate fell to a four-decade low of 4.99 percent in June 2003.
Fed
Mortgage rates have been rising since the end of August as Federal Reserve policy makers keep to their ''measured'' pace of interest-rate increases. Central bankers have raised their overnight bank lending rate by a quarter point at each of their last 11 meetings and are forecast to boost it to 4 percent on Nov. 1.
''We believe that the housing market is somewhat extended in terms of the prices and it's possible housing will slow down one of these days,'' said Kerry Killinger, chief executive of Washington Mutual Inc, in an Oct. 19 interview from Seattle. ''We think the overall size of the mortgage market likely to be lower than in 2005.
The National Association of Realtors forecasts previously owned home sales, which make up 85 percent of residential real estate, this year to reach a record 7.1 million this year and 6.86 million in 2006.
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