NEW YORK - U.S. mortgage applications plunged to a seven-month low last week as demand for home refinancing loans tumbled 30 percent, data from an industry group showed on Wednesday.
The drop does not bode well for the hard-hit U.S. housing market, which has been showing some signs of stabilization, with sales rising and home price declines moderating in many regions of the country.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended June 26 decreased 18.9 percent to 444.8, the lowest reading since the week ended November 21, 2008.
Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley, said mortgage rates are just one factor driving potential borrowers.
"Rising unemployment, concerns about job security, potential buyers' inability to sell their existing homes and problems with appraisals coming in too low are all weighing on demand," he said.
"The government needs to take more aggressive action to bring mortgage rates back down to below 5 percent as that seems to be a key level for the market," he said.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 5.34 percent, down 0.10 percentage point from the previous week, but significantly higher than the all-time low of 4.61 percent set in the week ended March 27. The survey has been conducted weekly since 1990.
Mortgage rates remained above 5 percent for a fifth straight week, but were well below year-ago levels of 6.33 percent.
Thirty-year mortgage rates had mostly been on a downward trend since the Federal Reserve unveiled its plan to buy mortgage-backed debt in late November. But the Fed met resistance in the bond market in late May and early June.
Treasury yields, which act as a benchmark for mortgage rates, rose sharply during that period. Treasury yields, however, have come down recently, allowing rates to fall.
The MBA's seasonally adjusted purchase index fell 4.5 percent to 267.7.
The four-week moving average of mortgage applications, which smooths the volatile weekly figures, was down 9.2 percent.
Source: Reuters