Mortgage Applications Fall as Refinancings Drop
NEW YORK – U.S. mortgage applications fell last week, dragged down by home refinancings slumping to a 17-month low as interest rates clung near the highest levels of the year, an industry trade group said Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity for the week ended Dec. 9 dropped 5.7 percent to 619.3 from the previous week's 656.7.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.28 percent, down 0.04 percentage point from the previous week's 6.32 percent.
The 30-year fixed-rate mortgage, the industry benchmark, is substantially above its 2005 low of 5.47 percent in late June and close to its 6.33 percent high in the week of Nov. 11.
U.S. home sales have remained historically high despite rising mortgage rates. On the other hand, less refinancing should eventually rein in consumer spending, analysts said.
"Although home buying remains relatively strong — albeit off its most robust levels — refinancing activity has slumped," said Steven Wood, chief economist at Insight Economics.
"Less refinancing activity should dampen consumer spending — although that has not yet occurred," he said in a research note.
The Mortgage Bankers Association's seasonally adjusted index of refinancing applications dropped 9.7 percent to 1,441.8, from 1,596.4 the previous week. Volume was at the lowest level since the week ended June 25, 2004, when the index reached 1,386.9.
The MBA's seasonally adjusted purchase mortgage index also fell. It dropped 3.5 percent to 477.9 from the previous week's 495.1. The index is considered a timely gauge on U.S. home sales.
Analysts and economists say the steady climb in interest rates in recent months may have started cooling rate-sensitive areas of the economy like housing.
"Some sectors of the economy may be slowing down. The housing sector may be doing just that," said Jon Basile, an economist at Credit Suisse First Boston.
The MBA's survey covers about 50 percent of all U.S. retail residential mortgage originations. Respondents include mortgage bankers, commercial banks and thrifts.