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The MBA’s mortgage application index fell nearly 10% last week driven down by the highest interest rates in a year. High rates, coupled with declining property values and tighter underwriting guidelines continue to put pressure on the mortgage market.
From Bloomberg:
Mortgage applications in the U.S. declined last week, led by a slump in refinancing as borrowing costs surged.
The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan fell 8.8 percent to 507.9 from 557.1 the prior week. The index reached a six-year low of 502.3 last month. The group’s purchase index decreased 4.4 percent and its refinancing gauge lost 15 percent.
Prospective buyers are holding off as rising foreclosures add to the glut of properties on the market and force home values down even more. Sales will probably remain depressed as lenders restrict credit, and concern over inflation boosts mortgage rates.
“The increase in mortgage rates is decidedly negative for the housing outlook,” said Michelle Meyer, an economist at Lehman Brothers Holdings Inc. in New York. “Higher rates strain affordability, suggesting home prices may have to fall further to provide an offset.”
The average rate on a 30-year fixed-rate loan rose to 6.57, the highest level since June 2007, from 6.24 percent. At the current rate, monthly borrowing costs for each $100,000 of a loan would be $637, up $69 from the year’s low reached in January.
The average rate on a 15-year fixed mortgage increased to 6.14 percent from 5.78 percent, while the rate on a one-year adjustable mortgage jumped to 7.22 percent, the highest level since December 2000, from 6.87 percent.
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