NEW YORK – U.S. mortgage rates fell to four-month lows last week, but were not enough to entice a fresh wave of borrowers to apply for home loans, according to data from an industry group released on Wednesday.
The Mortgage Bankers Association (search) said its seasonally adjusted market index, a measure of mortgage activity, dipped for the week ending August 6 by 0.7 percent to 616.1 from the previous week's 620.4.
The Washington trade group's seasonally adjusted refinancing index, however, rose after falling for four consecutive weeks. For the week ended August 6, it rose by 2.5 percent to 1,640.5 from previous week's 1,600.3.
This latest rate drop will unlikely ignite a surge in loan demand. Many fence-sitters had committed to loans in recent weeks in anticipation of rates heading higher, Orawin Velz, senior economist at Fannie Mae (search) said.
"They were thinking ahead and they went for it," she said.
Thirty-year mortgage rates, excluding fees, averaged 5.80 percent, down 0.17 percentage point from the previous week and down 0.20 percentage point from a year ago. The 30-year rates fell to their lowest level since the week of April 9 when they averaged 5.77 percent.
Rates fell sharply as the U.S. bond market staged a huge rally last Friday, prompted by paltry U.S. job growth in July. The disappointing employment reading stirred hopes that the Federal Reserve (search) would curb its stand in raising interest rates the rest of year.
Ten-year Treasury yield , benchmark for 30-year mortgage rates, hit their lowest level since April.
On Tuesday, however, the Fed raised short-term U.S. rates by a quarter percentage point dashing hopes it would relent on a "measured" path to rate hikes, saying that signs of an economic slowdown are temporary.
Mortgage lenders remained optimistic that the latest rate decline would boost their business. Countrywide Financial Corp. (CFC), one of the largest U.S. lenders, said on Tuesday it expected a near-term rebound in new mortgage application activity after reporting a 7 percent drop in loan funding in July from June.
The Washington trade group's purchase index, a gauge of new loan requests for home purchases, which had been the strong component of previous reports as home buyers rushed to avoid higher rates, fell last week for the first time in three weeks by 2.7 percent to 440.0 from 452.0 in the prior week.