U.S. MBA's Mortgage Applications Index Declined 23% Last Week

U.S. MBA's Mortgage Applications Index Declined 23% Last Week


Feb. 20 (Bloomberg) -- Mortgage applications in the U.S. dropped by the most in more than four years as the highest mortgage rates in two months weakened demand for home buying and refinancing.

The Mortgage Bankers Association's index of applications to buy a home or refinance a loan fell 23 percent to 822.8 from 1063.5 a week earlier. The group's refinancing gauge plunged 28 percent, the most in more than three years, and the purchase index declined 12 percent.

The last time the applications gauge dropped so much was the week ended July 25, 2003, when the index fell 24 percent. Concerns about the slowing economy as well as the perception that home prices will continue to decline are keeping potential buyers from purchasing and may continue to drag down sales in coming months.

``There's really no end in sight to the declines we're seeing,'' in housing, Michael Gregory, a senior economist at BMO Capital Markets in Toronto, said before the report.

The mortgage bankers' refinancing gauge decreased to 3533.8 last week, from 4901.5. The purchase index fell to 357.6, the lowest level since April 25, 2003, from 403.9.

Applications figures may be overstating activity because the collapse in subprime lending is prompting some owners and potential buyers to file multiple applications to ensure financing.

Federal Reserve officials anticipate that homebuilders will take most of the year to work off inventories of unsold homes and start contributing to economic growth.

Fed's Outlook

``Further cuts in homebuilding and in related activities are likely,'' Fed Chairman Ben S. Bernanke told lawmakers at a Feb. 14 congressional hearing. He also said the central bank ``will act in a timely manner as needed to support growth.''

The National Association of Homebuilders said yesterday that its builder sentiment index edged up to 20 this month as companies reported that more prospective buyers were touring new homes.

An increase in people shopping for a house is ``giving us some hope that prospective buyers think it is a better time to buy,'' NAHB Chief Economist David Seiders said in a Bloomberg Television interview yesterday.

Today's report showed the share of applications for refinancing fell to 62 percent.

The average rate on a 30-year fixed-rate loan rose to 6.09 percent, the highest since the week ended Dec. 21, the MBA said, from 5.72 percent the prior week. At the current rate, monthly borrowing costs for each $100,000 of a loan would be $605.35.

The average rate on a 15-year fixed mortgage increased to 5.55 percent from 5.18 percent. The rate on a one-year adjustable-rate mortgage held at 5.72 percent.

The Washington-based Mortgage Bankers Association's loan survey, compiled every week since 1990, covers about half of all U.S. retail residential mortgage originations.

BLOOMBERG