U.S. Mortgage Applications Fall by 1.6%
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Mortgage applications in America fell last week to the lowest level of the year as home purchases and refinancing declined, a sign housing will be less of a source of strength for the economy.
The Mortgage Bankers Association’s weekly application index dropped 1.6% to 565.0 from 574.4.The Washington-based group’s purchase gauge fell 2.3% to 393.6.
A rise in mortgage rates this year is limiting sales and making it less profitable to refinance existing loans. Home sales are forecast to fall after five years of records and price appreciation may ebb, making it more difficult for consumers to finance spending by borrowing against their homes.
“Housing-related activity has definitely slowed and its contributions to economic growth, both direct and indirect, will fade over the next couple of quarters,” chief economist at Insight Economics in Danville, Calif., Steven Wood, said.
Purchase applications are down 26% since reaching a high in June of last year, the mortgage bankers group said.
The average rate on a fixed 30-year mortgage fell to 6.31% last week from 6.42% the prior week, the bankers’ group said. Borrowing costs for every $100,000 of a loan would be $619.62 a month, based on last week’s contract rate for a 30-year fixed mortgage, compared with $596.34 a year ago when the average rate was 5.95%.
Federal Reserve policy makers have raised their benchmark interest rate 14 consecutive times since June 2004 to restrain inflation, and most economists surveyed by Bloomberg News forecast at least two more increases this year from the current 4.5%.
The mortgage bankers group’s gauge of refinancing fell 0.6% to 1574.5 from 1583.6. The index is down 47% from a 12-month high reached in June.
The cash extracted by homeowners from refinancing conventional mortgages may drop to $117 billion this year from an estimated $243 billion last year, according to a report last month from Freddie Mac, the no. 2 buyer of mortgages.
As the housing market cools, consumer-spending growth from April through June will slow to 2.9% from an estimated pace of 4.7% this quarter, according to the median estimate in a Bloomberg News survey of 74 economists from February 27 to March 7.
