Measure of mortgage applications falls 0.5%

Purchases decline for 2nd time in 3 weeks

November 02, 2003|By BLOOMBERG NEWS

An index measuring the number of applications for U.S. mortgages fell last week as purchases declined for the second time in three weeks.

The Mortgage Bankers Association in Washington said its gauge declined 0.5 percent in the week that ended Oct. 24 to 649.6. The group's purchase applications index fell 5.7 percent to 363.9.

Mortgage rates that have risen since a record low in June may be starting to restrain the housing market, which has helped fuel economic growth the past two years, economists said.

"The pace in the last few months has been incredible and activity would be difficult to sustain at this pace," said Michael Moran, chief economist at Daiwa Securities America Inc. in New York.

The average 30-year fixed mortgage rate fell to 5.94 percent last week from 6.05 percent the prior week, Freddie Mac said. The figure hit 5.21 percent in June.

The MBA's refinancing index rose 4.9 percent to 2311.8. The index has plunged from a high of 9977.8 in May, when falling interest rates encouraged homeowners to take cash out of their homes. That provided a boost to consumer spending that economists said will fade as rates rise.

"This prop to spending is likely to drop off in the wake of the summer's collapse in mortgage refinancing applications," said Ed McKelvey, senior economist at Goldman, Sachs & Co. in New York.

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