Mortgage Applications Down Last Week

Feb 23, 2005 — NEW YORK (Reuters) - Applications for U.S. home mortgages decreased last week as a drop in home purchasing activity offset a marginal increase in refinancing, amid a rise in interest rates, an industry group said on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity decreased 0.6 percent to 727.9 in the week ended Feb 18, after falling 0.5 percent in the MBA's prior week survey.

A sharp rise in interest rates may have dampened demand for mortgages.

Fixed 30-year mortgage rates averaged 5.67 percent last week, excluding fees, up 17 basis points from 5.50 percent the previous week.

Despite the increase, mortgage rates remain historically low, which encouraged a modest amount of U.S. consumers to refinance their existing loans.

The MBA's seasonally adjusted index of refinancing applications climbed 0.1 percent to 2532.0, adding to the 4.1 percent gain the prior week. It marked the fifth gain in the past six weeks.

That is also the highest level of refinancings since the week ended April 16, 2004 when the index reached 2,550.3.

Refinancings made up 49.3 percent of all mortgage applications last week, down from 49.9 percent the previous week.

But low mortgage rates failed to spur home purchasing activity last week, possibly due to an increase in adjustable rate mortgages which are favored by many new home buyers.

The MBA's purchase index, a gauge of loan requests for home purchases, declined 1.3 percent to 417.8, after dropping 4.8 percent the previous week.

Applications for adjustable-rate mortgages made up 30.7 percent of total applications, unchanged from the previous week.

One-year adjustable-rate mortgage rates averaged 4.18 percent, up from 4.10 percent one week earlier.