Mortgage bankers' gauge of demand for loans falls

July 04, 2004|By BLOOMBERG NEWS

A measure of U.S. mortgage applications fell for the first time in three weeks as home purchases and refinancing declined.

The Mortgage Bankers Association said Wednesday that its gauge of loan demand dropped 4.4 percent to 575. The purchase index decreased 4.2 percent to 435.4. The measure of homebuying reached a record 501.6 in January.

Economic growth and signs of accelerating inflation have pushed up market interest rates. Higher mortgage rates may start to restrain demand after home sales reached a record level in May, said David Lereah, chief economist at the National Association of Realtors.

"It appears that May will have been the peak, but June will still be strong," Lereah said. "I've been wrong on that before though, and housing has continued to defy gravity."

The rise in mortgage interest rates has crimped refinancing, which dropped 86 percent from a record level in May of last year, removing a source of cash that helped fuel consumer spending and economic growth the past several quarters.

The mortgage banking group reported that its index of refinancing fell 4.7 percent to 1,386.9 last week.

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